EXHIBIT 13.6

                           METROPOLITAN EDISON COMPANY

                       2002 ANNUAL REPORT TO STOCKHOLDERS



        Metropolitan  Edison Company (Met-Ed) is a wholly owned electric utility
operating  subsidiary of FirstEnergy  Corp. It engages in the  distribution  and
sale of  electric  energy  in an area of  approximately  3,300  square  miles in
eastern  Pennsylvania.  It also engages in the sale, purchase and interchange of
electric  energy  with  other  electric  companies.  The  area it  serves  has a
population of approximately 1.3 million.

        In August 2000, FirstEnergy entered into an agreement to merge with GPU,
Inc.,  under which  FirstEnergy  would acquire all of the outstanding  shares of
GPU, Inc.'s common stock for approximately  $4.5 billion in cash and FirstEnergy
common  stock.  The merger  became  effective  on  November 7, 2001 and is being
accounted for by the purchase method.  Prior to that time,  Metropolitan  Edison
Company was a wholly owned subsidiary of GPU, Inc.






Contents                                                                Page
--------                                                                ----

Selected Financial Data...........................................       1
Management's Discussion and Analysis..............................      2-11
Consolidated Statements of Income.................................      12
Consolidated Balance Sheets.......................................      13
Consolidated Statements of Capitalization.........................      14
Consolidated Statements of Common Stockholder's Equity............      15
Consolidated Statements of Preferred Stock........................      15
Consolidated Statements of Cash Flows.............................      16
Consolidated Statements of Taxes..................................      17
Notes to Consolidated Financial Statements........................     18-30
Reports of Independent Accountants................................     31-32


<PAGE>

<TABLE>

                                               METROPOLITAN EDISON COMPANY

                                                 SELECTED FINANCIAL DATA

<CAPTION>
                                                          Nov. 7 -      Jan. 1 -        Year Ended December 31,
                                                                                    ---------------------------------
                                             2002     Dec. 31, 2001   Nov. 6, 2001   2000        1999         1998
---------------------------------------------------------------------------------------------------------------------
                                                                    (Dollars in thousands)

<S>                                      <C>           <C>          <C>           <C>          <C>          <C>
Operating Revenues.....................  $   986,608   $  143,760 | $    824,556  $   842,333  $  902,827   $  919,594
                                         ===========   ========== | ============  ===========  ==========   ==========
                                                                  |
Operating Income.......................  $    91,271   $   17,367 | $   102,247   $   135,211  $  154,774   $  124,447
                                         ===========   ========== | ===========   ===========  ==========   ==========
                                                                  |
Income Before Extraordinary Item.......  $    63,224   $   14,617 | $     62,381  $    81,895  $   95,123   $   57,720
                                         ===========   ========== | ============  ===========  ==========   ==========
                                                                  |
Net Income.............................  $    63,224   $   14,617 | $     62,381  $    81,895  $   95,123   $   50,915
                                         ===========   ========== | ============  ===========  ==========   ==========
                                                                  |
Earnings on Common Stock...............  $    63,224   $   14,617 | $     62,381  $    81,895  $   94,515   $   50,432
                                         ===========   ========== | ============  ===========  ============ ==========
                                                                  |
Total Assets...........................  $ 3,564,805   $3,607,187 |               $ 2,708,062  $2,747,059   $3,347,822
                                         ===========   ========== |               ===========  ==========   ==========
                                                                  |
                                                                  |
Capitalization:                                                   |
   Common Stockholder's Equity.........  $ 1,315,586   $1,288,953 |               $  537,013   $  501,417   $  687,059
   Cumulative Preferred Stock..........           --           -- |                       --           --       12,056
   Company-Obligated Mandatorily                                  |
     Redeemable Preferred Securities...           --           -- |                       --           --      100,000
   Company-Obligated Trust Preferred                              |
     Securities........................       92,409       92,200 |                  100,000      100,000           --
   Long-Term Debt......................      538,790      583,077 |                  496,860      496,883      546,904
                                         -----------   ---------- |               ------------ ------------ ----------
     Total Capitalization..............  $ 1,946,785   $1,964,230 |               $1,133,873   $1,098,300   $1,346,019
                                         ===========   ========== |               ==========   ==========   ==========
                                                                  |
                                                                  |
Capitalization Ratios:                                            |
   Common Stockholder's Equity.........         67.6%        65.6%|                     47.4%        45.7%        51.1%
   Cumulative Preferred Stock..........           --           -- |                       --           --          0.9
   Company-Obligated Mandatorily                                  |
     Redeemable Preferred Securities...           --           -- |                       --           --          7.4
   Company-Obligated Trust Preferred                              |
   Securities..........................          4.7          4.7 |                      8.8          9.1           --
   Long-Term Debt......................         27.7         29.7 |                     43.8         45.2         40.6
                                               -----        ----- |                    -----        -----        -----
     Total Capitalization..............        100.0%       100.0%|                    100.0%       100.0%       100.0%
                                               =====        ===== |                    =====        =====        =====
                                                                  |
                                                                  |
Transmission and Distribution                                     |
Kilowatt-Hour Deliveries (Millions):                              |
   Residential.........................        4,738          793 |      3,712         4,377        4,265        4,040
   Commercial..........................        3,991          652 |      3,203         3,699        3,488        3,321
   Industrial..........................        3,972          662 |      3,506         4,412        4,085        4,174
   Other...............................           35            6 |         27            38          107          110
                                             -------      ------- |    -------        ------       ------       ------
   Total Retail........................       12,736        2,113 |     10,448        12,526       11,945       11,645
   Total Wholesale.....................          840          195 |      1,067         2,120        4,597        1,249
                                              ------      ------- |    -------        ------       ------       ------
   Total...............................       13,576        2,308 |     11,515        14,646       16,542       12,894
                                              ======      ======= |    =======        ======       ======       ======
                                                                  |
                                                                  |
Customers Served:                                                 |
   Residential.........................      448,334      442,763 |                  436,573      430,746      425,431
   Commercial..........................       58,010       57,278 |                   56,080       54,969       53,764
   Industrial..........................        1,936        1,961 |                    1,967        2,073        2,090
   Other...............................          728          819 |                      810        1,057        1,063
                                             -------      ------- |                  -------      -------      -------
   Total...............................      509,008      502,821 |                  495,430      488,845      482,348
                                             =======      ======= |                  =======      =======      =======

                                                           1

</TABLE>


<PAGE>



                           METROPOLITAN EDISON COMPANY

                     Management's Discussion and Analysis of
                  Results of Operations and Financial Condition


        This discussion includes forward-looking statements based on information
currently  available  to  management  that  is  subject  to  certain  risks  and
uncertainties.  Such statements  typically contain,  but are not limited to, the
terms anticipate, potential, expect, believe, estimate and similar words. Actual
results  may  differ  materially  due to  the  speed  and  nature  of  increased
competition  and  deregulation  in the electric  utility  industry,  economic or
weather  conditions  affecting future sales and margins,  changes in markets for
energy  services,  changing  energy market  prices,  legislative  and regulatory
changes (including revised environmental requirements), and the availability and
cost of capital.

Results of Operations

        Net income  decreased  by 17.9% to $63.2  million in 2002,  compared  to
$77.0  million in 2001,  due to the  absence of deferral  accounting  for energy
costs in 2002 (see Regulatory  Matters.),  higher regulatory asset  amortization
and general  taxes.  These  increases  were  partially  offset by an increase in
operating  revenues and a decrease in other operating costs. In 2001, net income
decreased by 6.0% to $77.0 million,  from $81.9 million in 2000. Results in 2001
were affected by higher  purchased  power and other operating  costs,  partially
offset by increased operating revenues.

        Operating revenues  increased $18.3 million in 2002,  following a $126.0
million  increase in 2001. The sources of changes in operating  revenues  during
2002 and 2001,  as compared to the prior year,  are  summarized in the following
table.

 Sources of Revenue Changes                                  2002       2001
  -----------------------------------------------------------------------------
         Increase (Decrease)                                   (In millions)

  Increase in kilowatt-hour sales due to level of
     retail customers shopping for generation service...... $ 23.8      $142.6
  Increase in other retail kilowatt-hour sales............    31.1         8.2
  Decrease in wholesale sales.............................   (34.4)       (9.4)
  All other changes.......................................    (2.2)      (15.4)
  -----------------------------------------------------------------------------

  Net Increase in Operating Revenues......................  $ 18.3      $126.0
  ==============================================================================

Electric Sales

        In 2002,  further reductions in the number of residential and commercial
customers  who received  their power from  alternate  suppliers,  and  therefore
returned  to us as full  service  customers,  resulted  in  increased  operating
revenues.  During 2002,  only 12.7% of total  kilowatt-hours  delivered  were to
shopping customers, whereas that percentage was 16.2% in 2001 and 42.5% in 2000.
In addition to the higher  revenues from returning  shopping  customers,  warmer
summer  weather in 2002  contributed  to an increase in retail  sales,  as did a
slight increase in the number of residential and commercial customers. Partially
offsetting these 2002 increases were lower sales to industrial  customers due to
a decline in economic  conditions.  Revenues from wholesale  sales were lower in
2002 compared to 2001 due to a decrease in kilowatt-hours  available for sale to
other  parties,  as well as lower  average  prices for energy in 2002.  In 2001,
kilowatt-hour sales to wholesale customers also decreased; however, the decrease
was  partially  offset by an  increase  in the  average  price for energy  sold,
compared to 2000.  Changes in kilowatt-hour  sales by customer class in 2002 and
2001 are summarized in the following table:


            Changes in Kilowatt-hour Sales  2002         2001
               Increase (Decrease)

            Residential..................   5.0%         2.9%
            Commercial...................   3.4%         4.2%
            Industrial...................  (4.2)%       (5.5)%
            --------------------------------------------------

            Total Retail.................   1.5%         0.3%
            Wholesale.................... (33.4)%      (40.5)%
            --------------------------------------------------

            Total Sales..................  (1.7)%       (5.6)%
            --------------------------------------------------

                                       2

<PAGE>


Operating Expenses and Taxes

        Total  operating  expenses and taxes  increased  $46.6  million in 2002,
after  increasing  $141.6  million in 2001,  compared to the preceding  year. In
2002, the majority of the change was attributed to increases in purchased  power
costs,  regulatory  asset  amortization  and general taxes,  offset in part by a
decrease in other  operating  costs.  An increase in  purchased  power and other
operating costs accounted for the majority of the increase in 2001.

        Purchased power costs  increased $42.1 million in 2002,  compared to the
prior year.  The  increase was due  primarily  to energy costs of $40.2  million
incurred in 2002 that otherwise  would have been deferred  absent a Pennsylvania
Commonwealth  Court  decision  (see  Regulatory  Matters).   That  increase  was
partially  offset  by a  reduction  in power  purchased  during  2002.  In 2001,
purchased  power costs  increased  $91.2  million,  compared to 2000. The higher
costs resulted from increased  quantities of power purchased  through  two-party
agreements  and the PJM Power Pool due to a large number of customers  returning
to us in 2001 after receiving  their power from alternate  suppliers in 2000, as
well as higher average prices of power  purchased  under  two-party  agreements.
Partially  offsetting  the  increase was the effect of the  Pennsylvania  Public
Utility Commission's (PPUC) June 2001 order that allowed us to defer, for future
recovery from customers,  energy costs in excess of our fixed generation  tariff
rates,  retroactive to January 1, 2001, in connection  with our provider of last
resort (PLR) obligation (see Regulatory Matters).

        Other operating  costs decreased $23.8 million in 2002,  compared to the
previous  year. The decrease  resulted  principally  from reduced  uncollectible
accounts expense,  personnel reductions, the absence of employee severance costs
accrued  in  2001  and the  absence  of  costs  related  to the use of  portable
generators at substations  under a 2001 pilot  program.  Other  operating  costs
increased $47.8 million in 2001, compared to 2000,  primarily due to the absence
of a pension curtailment gain associated with employees who were terminated when
we sold our generating assets. This gain was realized in 2000 as a result of the
PPUC's Phase II Order. Other operating costs also increased due to costs related
to Voluntary Enhanced  Retirement Programs offered in 2001 to certain bargaining
unit employees.

        In 2002, the provision for depreciation and amortization increased $20.6
million,   compared  to  the  prior  year,  primarily  due  to  an  increase  in
amortization related to competitive transition charge (CTC) regulatory assets. A
$20.4 million increase in general taxes in 2002, compared to the prior year, was
the result of an increase in Pennsylvania gross receipts taxes.

Other Income

        Other income increased $8.5 million in 2002, compared to the prior year,
primarily due to increased  contract work performed  during 2002, as well as the
absence of 2001 net losses on futures contracts and options,  and the absence of
a 2001 payment for a sustainable  energy fund, which was made in accordance with
the Stipulation of Settlement  related to the  FirstEnergy/GPU  merger. In 2001,
other income  increased  $11.9 million,  compared to 2000. The 2001 increase was
due primarily to higher CTC interest income and the absence of a 2000 write-down
of regulatory  assets for  decommissioning  of Three Mile Island Unit 2 (TMI-2),
representing the net realized gain previously  recorded on the  accident-related
portion  of the  TMI-2  decommissioning  trust.  Partially  offsetting  the 2001
increases was the charge for the sustainable energy fund discussed above.

Net Interest Charges

        Net interest  charges  decreased  $6.1 million in 2002,  compared to the
prior  year,   primarily  due  to  reduced   short-term   borrowing  levels  and
amortization of purchase  accounting fair market value  adjustments  recorded in
connection  with the merger.  An additional  reduction was  attributable  to the
redemption of $30 million of notes in the first quarter of 2002; however,  those
reductions were partially offset by increased  interest on long-term debt due to
the issuance of $100 million of notes in September 2001 and $50 million of notes
in May 2002,  which were used to refinance $30 million of notes in July 2002. In
2001, net interest charges increased $1.2 million,  compared to 2000, due to the
September 2001 issuance of senior notes.

Capital Resources and Liquidity

     Changes in Cash Position

        As of  December  31,  2002,  we had  $15.7  million  of  cash  and  cash
equivalents  compared  with $25.3  million as of December  31,  2001.  The major
sources for changes in these balances are summarized below.

     Cash Flows From Operating Activities

        Cash flows provided from operating  activities totaled $101.9 million in
2002 and $30.1 million in 2001. The sources of these changes are as follows:

                                       3

<PAGE>


           Operating Cash Flows                 2002            2001
           ----------------------------------------------------------
                                                    (in millions)
           Cash earnings (1)...............     $186            $102
           Working capital.................      (84)            (72)
           -----------------------------------------------------------

                   Total...................     $102             $30
           ===========================================================

        (1) Includes net income,  depreciation and amortization,  deferred costs
            recoverable as regulatory assets,  deferred income taxes, investment
            tax credits and major noncash charges.

     Cash Flows From Financing Activities

        In  2002,  net cash  used  for  financing  activities  of $54.0  million
reflects redemptions of debt and $60.0 million in common stock dividend payments
to FirstEnergy,  as well as the issuance of unsecured notes. The following table
provides details regarding new issues and redemptions during 2002:

          Securities Issued or Redeemed in 2002
          --------------------------------------------------------
                                                     (in millions)
          New Issues
               Unsecured notes........................     $50
          --------------------------------------------------------

          Redemptions
               First Mortgage Bonds...................      60
          --------------------------------------------------------

          Short-term Borrowings, net source of cash...      16
          --------------------------------------------------------



        We had $88.3  million of short-term  indebtedness  on December 31, 2002,
compared  to  $72.0  million  on  December  31,  2001.  We may  borrow  from our
affiliates on a short-term  basis. We will not issue first mortgage bonds (FMBs)
other than as  collateral  for senior  notes,  since our senior note  indentures
prohibit  (subject  to certain  exceptions)  us from  issuing  any debt which is
senior to the senior notes.  As of December 31, 2002,  we had the  capability to
issue $74 million of additional senior notes based upon FMB collateral.  We have
no restrictions on the issuance of preferred stock.

        At the end of 2002, our common equity as a percentage of  capitalization
stood at 68% compared to 66% and 47% at the end of 2001 and 2000,  respectively.
In  2001  we  experienced  a  significant  increase  in  this  ratio  due to the
allocation of the purchase price when we were acquired by FirstEnergy.

     Cash Flows From Investing Activities

        Cash used for  investing  activities  totaled  $57.5 million in 2002 and
$68.2 million in 2001, and was used primarily for property  additions to support
the distribution of electricity in both periods.

        Our cash  requirements  in 2003  for  operating  expenses,  construction
expenditures,  scheduled debt  maturities and preferred  stock  redemptions  are
expected  to be  met  without  increasing  our  net  debt  and  preferred  stock
outstanding.  Over the next  three  years,  we  expect  to meet our  contractual
obligations  with  cash  from  operations.   Thereafter,  we  expect  to  use  a
combination of cash from operations and funds from the capital markets.

                                   Less than    1-3         3-5      More than
Contractual Obligations   Total     1 Year      Years      Years       5 Years
------------------------------------------------------------------------------
                                             (in millions)
Long-term debt.......   $  587    $   60     $   90        $202     $   235
Short-term borrowings       88        88         --          --          --
Preferred stock (1)..       92        --         --          --          92
Operating leases (2).       53         2          3           3          45
Purchases (3)........    2,158       264        318         337       1,239
---------------------------------------------------------------------------
   Total.............   $2,978      $414       $411        $542      $1,611
---------------------------------------------------------------------------

(1) Subject to mandatory redemption
(2) Operating  lease  payments  are net of reimbursements  from  sublessees (see
    Note 3)
(3) Fuel and power  purchases under  contracts with fixed or minimum  quantities
    and approximate timing

        Our capital  spending for the period 2003 through 2007 is expected to be
about $288 million, of which approximately $53 million applies to 2003.

                                       4

<PAGE>


        Following  approval  of the  merger  of  FirstEnergy  and GPU by the New
Jersey  Board of Public  Utilities on  September  26, 2001,  Standard and Poor's
adjusted  our  corporate  credit  rating from A/A-1 to  BBB/A-2,  and our senior
secured  debt rating from A+ to BBB+.  The credit  rating  outlook of Standard &
Poor's is stable.  On February  22,  2002,  Moody's  changed  its credit  rating
outlook from stable to negative based upon a decision by the Commonwealth  Court
of  Pennsylvania  to  remand  to the  PPUC  for  reconsideration  its  decisions
regarding rate relief, accounting deferrals and the mechanism for sharing merger
savings rendered in connection with its approval of the  FirstEnergy/GPU  merger
(see Regulatory Matters).

        On February 22, 2002, Moody's Investor Service changed its credit rating
outlook for  FirstEnergy  from stable to  negative.  The change was based upon a
decision by the Commonwealth Court of Pennsylvania to remand to the Pennsylvania
Public  Utility  Commission  (PPUC)  for  reconsideration  its  decision  on the
mechanism for sharing merger  savings and reversed the PPUC decisions  regarding
rate relief and accounting deferrals rendered in connection with its approval of
the GPU merger.  On April 4, 2002,  Standard & Poor's (S&P)  changed its outlook
for  FirstEnergy's   credit  ratings  from  stable  to  negative  citing  recent
developments  including:  damage to the  Davis-Besse  reactor  vessel head,  the
Pennsylvania  Commonwealth Court decision,  and deteriorating  market conditions
for some sales of FirstEnergy's  remaining  non-core  assets.  On July 31, 2002,
Fitch revised its rating outlook for  FirstEnergy  to negative from stable.  The
revised  outlook  reflected  the  adverse  impact of the  unplanned  Davis-Besse
outage,  Fitch's  judgment  about  NRG's  financial  ability to  consummate  the
purchase  of four power  plants from  FirstEnergy  and  Fitch's  expectation  of
subsequent delays in debt reduction. On August 1, 2002, S&P concluded that while
NRG's liquidity position added uncertainty to FirstEnergy's sale of power plants
to NRG, its ratings would not be affected.  S&P found  FirstEnergy's  cash flows
sufficiently  stable to support a continued  (although  delayed) program of debt
and  preferred  stock  redemption.  S&P noted that it would  continue to closely
monitor FirstEnergy's progress on various initiatives.  On January 21, 2003, S&P
indicated its concern about FirstEnergy's disclosure of non-cash charges related
to deferred costs in Pennsylvania,  pension and other post-retirement  benefits,
and  Emdersa  (FirstEnergy's  Argentina  operations),  which  were  higher  than
anticipated  in the third  quarter of 2002.  S&P  identified  the restart of the
Davis-Besse nuclear plant "...without significant delay beyond April 2003..." as
key to maintaining its current debt ratings. S&P also identified other issues it
would continue to monitor including:  FirstEnergy's  deleveraging  efforts, free
cash generated  during 2003, the Jersey Central Power & Light Company rate case,
successful  hedging  of its short  power  position,  and  continued  capture  of
projected  merger  savings.  While  FirstEnergy  anticipates  being  prepared to
restart  the  Davis-Besse  plant in the  spring of 2003 the  Nuclear  Regulatory
Commission (NRC) must authorize the unit's restart following a formal inspection
process prior to its returning  the unit to service.  Significant  delays in the
planned date of  Davis-Besse's  return to service or other  factors  (identified
above)  affecting  the speed  with  which  FirstEnergy  reduces  debt  could put
additional pressure on Met-Ed's credit ratings.

Market Risk Information

        We use various market risk sensitive  instruments,  including derivative
contracts,  primarily to manage the risk of price fluctuations.  Our Risk Policy
Committee, comprised of FirstEnergy executive officers, exercises an independent
risk oversight  function to ensure  compliance  with  corporate risk  management
policies and prudent risk management practices.

     Commodity Price Risk

        We  are  exposed  to  market  risk  primarily  due  to  fluctuations  in
electricity and natural gas prices.  To manage the volatility  relating to these
exposures,  we use a  variety  of  non-derivative  and  derivative  instruments,
including  options and futures  contracts.  The derivatives are used for hedging
purposes.  Most of our  non-hedge  derivative  contracts  represent  non-trading
positions that do not qualify for hedge  treatment  under Statement of Financial
Accounting  Standards  (SFAS)  133.  The change in the fair  value of  commodity
derivative  contracts  related to energy production during 2002 is summarized in
the following table:

Increase (Decrease) in the Fair Value
of Commodity Derivative Contracts
<TABLE>
<CAPTION>
                                                                     Non-Hedge     Hedge      Total
                                                                     ---------     -----      -----
                                                                            (In millions)
Change in the Fair Value of Commodity Derivative Contracts
<S>                                                                    <C>         <C>        <C>
Outstanding net asset as of January 1, 2002.................           $ 2.2       $  0.1     $  2.3
New contract value when entered.............................             --           --         --
Additions/Increase in value of existing contracts...........            15.2          1.6       16.8
Settled contracts...........................................              --         (1.6)      (1.6)
                                                                      -------------------------------

Net Assets - Derivatives Contracts as of December 31, 2002 (1)         $17.4       $  0.1     $ 17.5
                                                                      ===============================

Impact of Changes in Commodity Derivative Contracts (2)
Balance Sheet Effects:
   Regulatory Liability.....................................           $ 15.2      $   --     $ 15.2


</TABLE>


(1) Includes $17.0 million in non-hedge commodity derivative contracts which are
    offset by a regulatory liability.
(2) Represents the increase in value of existing contracts and settled contracts

                                       5

<PAGE>


Derivatives included on the Consolidated Balance Sheet as of December 31, 2002:

                                                Non-Hedge    Hedge     Total
                                                ---------    -----     -----
                                                        (In millions)
      Current-
            Other Assets...................      $  --       $0.1      $  0.1

      Non-Current-
            Other Deferred Charges.........       17.4         --        17.4
                                                 ------      ----      ------

              Net assets...................      $17.4       $0.1       $17.5
                                                 =====       ====       =====

        The  valuation of  derivative  contracts is based on  observable  market
information  to the extent that such  information  is available.  In cases where
such information is not available, we rely on model-based information. The model
provides  estimates of future regional prices for electricity and an estimate of
related price volatility.  We use these results in developing  estimates of fair
value for  financial  reporting  purposes and for internal  management  decision
making. Sources of information for the valuation of derivative contracts by year
are summarized in the following table:

Source of Information - Fair Value by Contract Year

<TABLE>
<CAPTION>
                                          2003       2004       2005       2006       Thereafter     Total
                                          ----       ----       ----       ----       ----------     -----
                                                                  (In millions)

<S>                                       <C>        <C>        <C>       <C>            <C>          <C>
Prices based on external sources......    $0.5       $0.6       $1.5      $  --          $  --        $ 2.6
Prices based on models(1).............      --         --         --        2.2           12.7         14.9
                                         -------------------------------------------------------------------

    Total(2)..........................    $0.5       $0.6       $1.5       $2.2          $12.7        $17.5
                                         ===================================================================
</TABLE>

  (1)  Broker quote sheets.
  (2)  Includes  $17.0  million  from an  embedded  option that  is  offset by a
       regulatory liability and does not affect earnings.


        We perform  sensitivity  analyses to estimate our exposure to the market
risk of our  commodity  position.  A  hypothetical  10% adverse  shift in quoted
market  prices in the near term on derivative  instruments  would not have had a
material  effect on our  consolidated  financial  position  or cash  flows as of
December 31, 2002.

     Interest Rate Risk

        Our exposure to  fluctuations  in market interest rates is reduced since
our debt has fixed interest rates, as noted in the following table.

<TABLE>

Comparison of Carrying Value to Fair Value
<CAPTION>
                                                                                        There-               Fair
                                 2003       2004       2005       2006       2007       after      Total     Value
------------------------------------------------------------------------------------------------------------------
                                                                (Dollars in millions)
Assets
<S>                               <C>        <C>       <C>       <C>          <C>        <C>        <C>      <C>
Investments other than Cash and Cash
   Equivalents-Fixed Income..      --         --        --         --          --       $  54      $  54     $54
   Average interest rate.....                                                             4.6%      4.6%
------------------------------------------------------------------------------------------------------------------

Liabilities
------------------------------------------------------------------------------------------------------------------
Long-term Debt:
Fixed rate...................     $60        $40       $50       $151         $51        $235       $587     $598
   Average interest rate ....     7.0%       6.3%      7.0%       5.9%        5.9%       7.6%       6.8%
------------------------------------------------------------------------------------------------------------------
Preferred Stock..............      --         --        --         --          --       $  92      $  92     $100
   Average dividend rate ....                                                             7.4%       7.4%
------------------------------------------------------------------------------------------------------------------
</TABLE>

        We  are  subject  to  the  inherent   interest  rate  risks  related  to
refinancing maturing debt by issuing new debt securities.  Changes in the market
value of our  nuclear  decommissioning  trust  funds  are  recognized  by making
corresponding changes to the decommissioning  liability,  as described in Note 1
to the consolidated financial statements.

     Equity Price Risk

        Included  in  nuclear   decommissioning  trusts  are  marketable  equity
securities  carried at their market value of  approximately  $81 million and $91
million at December 31, 2002 and 2001, respectively. A hypothetical 10% decrease
in

                                       6

<PAGE>


prices quoted by stock exchanges would result in an $8 million reduction in fair
value  at  December  31,  2002.   (See  Note  1  -   "Supplemental   Cash  Flows
Information.")

Outlook

        Our industry continues to transition to a more competitive  environment.
As of January 1, 1999,  all of our  customers  could select  alternative  energy
suppliers.  We continue  to deliver  power to homes and  businesses  through our
existing  distribution system, which remains regulated.  The PPUC authorized our
rate  restructuring  plan,   establishing  separate  charges  for  transmission,
distribution,  generation and stranded cost recovery, which is recovered through
a CTC.  Customers  electing to obtain power from an  alternative  supplier  have
their  bills  reduced  based  on the  regulated  generation  component,  and the
customers receive a generation charge from the alternative  supplier.  We have a
continuing  responsibility  to provide power to those  customers not choosing to
receive power from an alternative  energy  supplier,  subject to certain limits,
which is referred to as our PLR obligation.

        Regulatory  assets are costs which  regulatory  agencies have authorized
for recovery from customers in future periods and,  without such  authorization,
would have been charged to income when incurred.  All of our  regulatory  assets
are expected to continue to be recovered  under the provisions of the regulatory
plans as discussed  below.  Our regulatory  assets totaled $1.2 billion and $1.3
billion as of December 31, 2002 and 2001, respectively.

     Regulatory Matters

        Effective  September  1, 2002,  we assigned  our provider of last resort
(PLR) responsibility to our unregulated supply affiliate,  FirstEnergy Solutions
Corp. (FES),  through a wholesale power sale agreement which expires in December
2003 and may be extended for each successive  calendar year.  Under the terms of
the  wholesale  agreement,  FES  assumed the supply  obligation,  and the energy
supply profit and loss risk, for the portion of power supply  requirements  that
we do not self-supply under our non-utility generation (NUG) contracts and other
existing  power  contracts  with  nonaffiliated  third  party  suppliers.   This
arrangement  reduces our  exposure to high  wholesale  power prices by providing
power at or below the  shopping  credit for our  uncommitted  PLR  energy  costs
during the term of the  agreement  to FES.  We will  continue  to defer the cost
differences  between NUG  contract  rates and the rates  reflected in our capped
generation rates.

        In its February 21, 2002 decision on Petitions for Review  regarding the
June 2001 PPUC orders which approved the FirstEnergy/GPU  merger and provided us
deferral  accounting  treatment  for energy  costs,  the  Commonwealth  Court of
Pennsylvania  affirmed the PPUC merger  decision,  remanding the decision to the
PPUC only with respect to the issue of merger  savings.  The Court  reversed the
PPUC's decision regarding our PLR obligations,  and denied us authority to defer
for future  recovery the  difference  between our wholesale  power costs and the
amount we collect from retail  customers.  We and the PPUC each filed a Petition
for  Allowance  of Appeal  with the  Pennsylvania  Supreme  Court in March 2002,
asking it to review the  Commonwealth  Court  decision.  In the first quarter of
2002, we established a $103.0 million  reserve  against our PLR deferred  energy
costs incurred prior to our  acquisition by FirstEnergy.  The reserve  reflected
the potential  adverse impact of a pending  Pennsylvania  Supreme Court decision
whether to review the Commonwealth  Court ruling. The reserve increased goodwill
by an aggregate  net of tax amount of $60.3  million.  On January 17, 2003,  the
Pennsylvania  Supreme Court denied further appeals of the  Commonwealth  Court's
decision,  which  effectively  affirmed  the PPUC's order  approving  the merger
between  FirstEnergy and GPU, let stand the  Commonwealth  Court's denial of our
request for PLR rate relief and  remanded the merger  savings  issue back to the
PPUC.

     FERC Regulatory Matters

        On December 19, 2002 the Federal  Energy  Regulatory  Commission  (FERC)
granted  unconditional   Regional   Transmission   Organization  status  to  PJM
Interconnection, LLC (PJM). We are a transmission owner in PJM.

     Environmental Matters

        We have been named as a "potentially  responsible  party" (PRP) at waste
disposal sites which may require cleanup under the  Comprehensive  Environmental
Response,  Compensation  and Liability Act of 1980.  Allegations  of disposal of
hazardous  substances at historical  sites and the liability  involved are often
unsubstantiated and subject to dispute;  however,  federal law provides that all
PRPs  for a  particular  site  be held  liable  on a joint  and  several  basis.
Therefore,  potential  environmental  liabilities  have been  recognized  on the
Consolidated  Balance  Sheet as of December 31, 2002,  based on estimates of the
total costs of cleanup, our proportionate  responsibility for such costs and the
financial  ability  of other  nonaffiliated  entities  to pay.  We have  accrued
liabilities  aggregating  approximately $0.2 million as of December 31, 2002. We
do not  believe  environmental  remediation  costs will have a material  adverse
effect on our financial condition, cash flows or results of operations.

                                       7

<PAGE>


        Legal Matters

        Various lawsuits,  claims and proceedings related to our normal business
operations are pending  against us, the most  significant of which are described
below.

        We have a 50% ownership  interest in TMI-2,  which was damaged  during a
1979 accident.  As a result of the accident,  claims for alleged personal injury
against  Met-Ed,  Jersey  Central Power & Light Company,  Pennsylvania  Electric
Company and GPU (the  defendants) had been filed in the U.S.  District Court for
the Middle  District of  Pennsylvania.  In 1996,  the District  Court  granted a
motion for  summary  judgment  filed by the  defendants  and  dismissed  the ten
initial "test cases" which had been  selected for a test case trial.  In January
2002,  the  District  Court  granted  our motion  for  summary  judgment  on the
remaining 2,100 pending claims.  In February 2002, the plaintiffs filed a notice
of appeal of this decision (see Note 6 - Other Legal  Proceedings).  In December
2002,  the Court of Appeals  for the Third  Circuit  refused to hear the appeal,
which effectively ended further legal action for those claims.

Significant Accounting Policies

        We prepare our  consolidated  financial  statements in  accordance  with
accounting  principles  that  are  generally  accepted  in  the  United  States.
Application  of these  principles  often  requires  a high  degree of  judgment,
estimates and assumptions that affect financial  results.  All of our assets are
subject to their own specific risks and uncertainties and are regularly reviewed
for  impairment.  Assets related to the  application  of the policies  discussed
below are similarly reviewed with their risks and uncertainties reflecting these
specific factors. Our more significant accounting policies are described below.

     Purchase Accounting

        On  November  7, 2001,  the merger  between  FirstEnergy  and GPU became
effective,  and we became a wholly owned  subsidiary of FirstEnergy.  The merger
was accounted for by the purchase method of accounting,  which requires judgment
regarding the  allocation of the purchase  price based on the fair values of the
assets acquired (including  intangible assets) and the liabilities  assumed. The
fair values of the acquired assets and assumed  liabilities were based primarily
on estimates.  The adjustments reflected in our records, which were finalized in
the fourth  quarter of 2002,  primarily  consist of: (1)  revaluation of certain
property,  plant  and  equipment;  (2)  adjusting  preferred  stock  subject  to
mandatory redemption and long-term debt to estimated fair value; (3) recognizing
additional  obligations  related to  retirement  benefits;  and (4)  recognizing
estimated  severance  and  other  compensation  liabilities.  The  excess of the
purchase  price  over the  estimated  fair  values of the  assets  acquired  and
liabilities  assumed was recognized as goodwill.  Based on the guidance provided
by SFAS 142,  "Goodwill and Other  Intangible  Assets," we evaluate our goodwill
for  impairment  at least  annually  and  would  make  such an  evaluation  more
frequently if indicators of impairment  should arise.  The forecasts used in our
evaluations of goodwill reflect operations  consistent with our general business
assumptions. Unanticipated changes in those assumptions could have a significant
effect on our future  evaluations  of goodwill.  As of December 31, 2002, we had
recorded goodwill of approximately $885.8 million related to the merger.

     Regulatory Accounting

        We are  subject  to  regulation  that  sets the  prices  (rates)  we are
permitted to charge our customers  based on costs that the  regulatory  agencies
determine we are permitted to recover.  At times,  regulators  permit the future
recovery through rates of costs that would be currently charged to expense by an
unregulated  company.  This  rate-making  process  results in the  recording  of
regulatory assets based on anticipated  future cash inflows.  As a result of the
changing  regulatory   framework  in  Pennsylvania,   a  significant  amount  of
regulatory  assets have been recorded - $1.2 billion as of December 31, 2002. We
regularly review these assets to assess their ultimate recoverability within the
approved  regulatory  guidelines.  Impairment  risk associated with these assets
relates to potentially  adverse  legislative,  judicial or regulatory actions in
the future.

     Derivative Accounting

        Determination  of appropriate  accounting  for  derivative  transactions
requires the involvement of management representing operations, finance and risk
assessment.  In order to determine the  appropriate  accounting  for  derivative
transactions,  the  provisions of the contract need to be carefully  assessed in
accordance  with  the  authoritative   accounting  literature  and  management's
intended use of the derivative.  New authoritative  guidance  continues to shape
the  application  of  derivative  accounting.   Management's   expectations  and
intentions  are key factors in  determining  the  appropriate  accounting  for a
derivative  transaction and, as a result,  such  expectations and intentions are
documented. Derivative contracts that are determined to fall within the scope of
SFAS 133, as amended, must be recorded at their fair value. Active market prices
are not always  available  to  determine  the fair value of the later years of a
contract,  requiring  that various  assumptions  and  estimates be used in their
valuation.  We continually monitor our derivative  contracts to determine if our
activities, expectations, intentions, assumptions and estimates remain valid. As
part of our normal operations,  we enter into commodity contracts which increase
the impact of derivative accounting judgments.

                                       8

<PAGE>


     Revenue Recognition

        We follow the accrual  method of accounting  for  revenues,  recognizing
revenue for  kilowatt-hours  that have been delivered but not yet billed through
the  end of the  accounting  period.  The  determination  of  unbilled  revenues
requires management to make various estimates including:

o     Net energy generated or purchased for retail load
o     Losses of energy over transmission and distribution lines
o     Mix  of  kilowatt-hour  usage by residential,  commercial  and  industrial
      customers
o     Kilowatt-hour  usage of customers  receiving  electricity from alternative
      suppliers

     Pension and Other Postretirement Benefits Accounting

        Our  reported  costs  of  providing   non-contributory  defined  pension
benefits and  postemployment  benefits other than pensions  (OPEB) are dependent
upon  numerous  factors  resulting  from  actual  plan  experience  and  certain
assumptions.

        Pension and OPEB costs are affected by employee demographics  (including
age, compensation levels, and employment periods), the level of contributions we
make to the plans, and earnings on plan assets.  Pension and OPEB costs may also
be affected by changes to key assumptions, including anticipated rates of return
on plan  assets,  the  discount  rates  and  health  care  trend  rates  used in
determining the projected benefit obligations and pension and OPEB costs.

        In accordance  with SFAS 87,  "Employers'  Accounting  for Pensions" and
SFAS  106,  "Employers'  Accounting  for  Postretirement   Benefits  Other  Than
Pensions," changes in pension and OPEB obligations associated with these factors
may  not be  immediately  recognized  as  costs  on the  income  statement,  but
generally  are  recognized in future years over the  remaining  average  service
period of plan  participants.  SFAS 87 and SFAS 106 delay recognition of changes
due to the  long-term  nature of pension  and OPEB  obligations  and the varying
market  conditions  likely  to  occur  over  long  periods  of  time.  As  such,
significant  portions of pension  and OPEB costs  recorded in any period may not
reflect the actual level of cash benefits  provided to plan participants and are
significantly  influenced by assumptions about future market conditions and plan
participants' experience.

        In selecting an assumed discount rate, we consider  currently  available
rates  of  return  on  high-quality  fixed  income  investments  expected  to be
available during the period to maturity of the pension and other  postretirement
benefit obligations. Due to the significant decline in corporate bond yields and
interest rates in general  during 2002, we reduced the assumed  discount rate as
of December 31, 2002 to 6.75% from 7.25% used in 2001 and 7.75% used in 2000.

        Our assumed rate of return on pension plan assets  considers  historical
market returns and economic  forecasts for the types of investments  held by our
pension  trusts.  The market values of our pension  assets have been affected by
sharp declines in the equity markets since  mid-2000.  In 2002, plan assets have
earned (11.3)%.  Our pension costs in 2002 were computed  assuming a 10.25% rate
of return on plan  assets.  As of December  31, 2002 the assumed  return on plan
assets was  reduced to 9.00%  based upon our  projection  of future  returns and
pension trust investment allocation of approximately 60% large cap equities, 10%
small cap equities and 30% bonds.

        Based on pension  assumptions and pension plan assets as of December 31,
2002, we will not be required to fund our pension plans in 2003. While OPEB plan
assets have also been  affected  by sharp  declines  in the equity  market,  the
impact  is not as  significant  due to the  relative  size of the  plan  assets.
However,  health care cost trends have  significantly  increased and will affect
future OPEB costs.  The 2003  composite  health  care trend rate  assumption  is
approximately 10%-12% gradually decreasing to 5% in later years, compared to our
2002 assumption of approximately 10% in 2002,  gradually  decreasing to 4%-6% in
later years. In determining our trend rate assumptions, we included the specific
provisions of our health care plans, the  demographics and utilization  rates of
plan participants,  actual cost increases  experienced in our health care plans,
and projections of future medical trend rates. Our non-cash, pre-tax pension and
OPEB  expense  under SFAS 87 and SFAS 106 is expected to increase by $18 million
and $6  million,  respectively  - a total of $24  million in 2003 as compared to
2002.

                                       9

<PAGE>



 Increase in Costs from Adverse Changes in Key Assumptions
  -----------------------------------------------------------------------------
  Assumption                     Adverse Change      Pension     OPEB    Total
  -----------------------------------------------------------------------------
                                                             (In millions)
  Discount rate................  Decrease by 0.25%    $1.3       $0.8    $2.1
  Long-term return on assets...  Decrease by 0.25%     0.9        0.2     1.1
  Health care trend rate.......  Increase by 1%        na         2.3     2.3


     Long-Lived Assets

        In accordance with SFAS 144,  "Accounting for the Impairment or Disposal
of  Long-Lived  Assets,"  we  periodically  evaluate  our  long-lived  assets to
determine  whether  conditions exist that would indicate that the carrying value
of an asset may not be fully recoverable.  The accounting standard requires that
if the sum of future cash flows (undiscounted)  expected to result from an asset
is less  than the  carrying  value of the  asset,  an asset  impairment  must be
recognized in the financial statements.  If impairment were to occur, other than
of a temporary  nature, we would recognize a loss - calculated as the difference
between the carrying value and the estimated fair value of the asset (discounted
future net cash flows).

Recently Issued Accounting Standards Not Yet Implemented

     SFAS 143, "Accounting for Asset Retirement Obligations"

        In June 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations".  The new statement  provides  accounting  standards for retirement
obligations  associated with tangible  long-lived assets, with adoption required
by January 1, 2003.  SFAS 143 requires that the fair value of a liability for an
asset  retirement  obligation be recorded in the period in which it is incurred.
The associated  asset  retirement  costs are capitalized as part of the carrying
amount of the long-lived  asset. Over time the capitalized costs are depreciated
and the present value of the asset retirement liability increases,  resulting in
a period  expense.  However,  rate-regulated  entities may recognize  regulatory
assets  or  liabilities  if the  criteria  for  such  treatment  are  met.  Upon
retirement,  a gain or  loss  would  be  recorded  if the  cost  to  settle  the
retirement obligation differs from the carrying amount.

        We have identified applicable legal obligations as defined under the new
standard, principally for nuclear power plant decommissioning.  Upon adoption of
SFAS 143, asset retirement costs of $186 million will be recorded as part of the
carrying  amount  of  the  related  long-lived  asset,   offset  by  accumulated
depreciation of $186 million.

        The asset  retirement  liability  at the date of  adoption  will be $198
million. As of December 31, 2002, we had recorded decommissioning liabilities of
$260 million.  The change in the estimated  liabilities resulted from changes in
methodology and various  assumptions,  including  changes in the projected dates
for decommissioning.

        Management expects that substantially all of our nuclear decommissioning
costs will be recoverable  through regulated rates.  Therefore,  we recognized a
regulatory liability of $61 million upon adoption of SFAS 143 for the transition
amounts related to  establishing  the asset  retirement  obligations for nuclear
decommissioning.  The remaining  cumulative  effect  adjustment to recognize the
undepreciated asset retirement cost and the asset retirement liability offset by
the reversal of the previously recorded  decommissioning  liabilities was a $0.4
million increase to income, or $0.2 million net of tax.

        SFAS  146,  "Accounting  for  costs  Associated  with  Exit or  Disposal
        Activities"

        This statement,  which was issued by the FASB in July 2002, requires the
recognition  of costs  associated  with exit or disposal  activities at the time
they are  incurred  rather  than when  management  commits  to a plan of exit or
disposal.  It also  requires the use of fair value for the  measurement  of such
liabilities.  The new standard  supersedes  guidance provided by Emerging Issues
Task  Force  Issue  No.  94-3,  "Liability   Recognition  for  Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs  Incurred in a  Restructuring)."  This new standard was effective for exit
and disposal  activities  initiated after December 31, 2002. Since it is applied
prospectively,  there will be no impact upon adoption.  However,  SFAS 146 could
change the timing and amount of costs  recognized in connection with future exit
or disposal activities.

        FASB Interpretation (FIN) No. 45, "Guarantor's Accounting and Disclosure
        Requirements   for   Guarantees,   Including   Indirect   Guarantees  of
        Indebtedness of Others - an interpretation of FASB Statements No. 5, 57,
        and 107 and rescission of FASB Interpretation No. 34"

                                       10

<PAGE>


        The FASB issued FIN 45 in January 2003. This  interpretation  identifies
minimum guarantee  disclosures required for annual periods ending after December
15, 2002. It also clarifies  that  providers of guarantees  must record the fair
value of those  guarantees  at their  inception.  This  accounting  guidance  is
applicable  on a  prospective  basis to  guarantees  issued  or  modified  after
December  31,  2002.  We do not believe  that  implementation  of FIN 45 will be
material but we will continue to evaluate anticipated guarantees.

        FIN 46, "Consolidation of Variable Interest Entities - an interpretation
        of ARB 51"

        In January  2003,  the FASB  issued this  interpretation  of ARB No. 51,
"Consolidated Financial Statements". The new interpretation provides guidance on
consolidation of variable interest entities (VIEs), generally defined as certain
entities  in  which  equity  investors  do not  have  the  characteristics  of a
controlling  financial interest or do not have sufficient equity at risk for the
entity to finance  its  activities  without  additional  subordinated  financial
support  from other  parties.  This  Interpretation  requires an  enterprise  to
disclose  the  nature  of its  involvement  with a VIE if the  enterprise  has a
significant  variable  interest  in  the  VIE  and to  consolidate  a VIE if the
enterprise is the primary  beneficiary.  VIEs created after January 31, 2003 are
immediately subject to the provisions of FIN 46. VIEs created before February 1,
2003 are subject to this  interpretation's  provisions  in the first  interim or
annual  reporting  period  beginning  after June 15, 2003 (our third  quarter of
2003).  The FASB also  identified  transitional  disclosure  provisions  for all
financial statements issued after January 31, 2003.

        We currently have transactions with entities in connection with the sale
of preferred securities, which may fall within the scope of this interpretation,
and  which  are  reasonably  possible  of  meeting  the  definition  of a VIE in
accordance with FIN 46. We currently  consolidate  these entities and believe we
will continue to consolidate following the adoption of FIN 46.

                                       11


<PAGE>

<TABLE>

                                               METROPOLITAN EDISON COMPANY

                                            CONSOLIDATED STATEMENTS OF INCOME


<CAPTION>
                                                                                 Nov 7 -        Jan. 1 -
                                                                  2002       Dec. 31, 2001    Nov. 6, 2001    2000
---------------------------------------------------------------------------------------------------------------------
                                                                                  (In thousands)

<S>                                                             <C>            <C>             <C>         <C>
OPERATING REVENUES (Note 1)...............................      $ 986,608      $ 143,760  |    $ 824,556   $  842,333
                                                                ---------      ---------  |    ---------   ----------
                                                                                          |
OPERATING EXPENSES AND TAXES:                                                             |
   Fuel and purchased power (Note 1)......................        604,305         83,275  |      478,954      471,070
   Other operating costs (Note 1).........................        115,371         16,122  |      123,094       91,456
                                                                ---------      ---------  |    ---------   ----------
     Total operation and maintenance expenses.............        719,676         99,397  |      602,048      562,526
   Provision for depreciation and amortization............         81,419          8,903  |       51,867       68,695
   General taxes..........................................         66,795          6,509  |       39,845       42,623
   Income taxes...........................................         27,447         11,584  |       28,549       33,278
                                                                ---------      ---------  |    ---------   ----------
     Total operating expenses and taxes...................        895,337        126,393  |      722,309      707,122
                                                                ---------      ---------  |    ---------   ----------
                                                                                          |
OPERATING INCOME..........................................         91,271         17,367  |      102,247      135,211
                                                                                          |
OTHER INCOME..............................................         21,742          5,465  |        7,807        1,387
                                                                ---------      ---------  |    ---------   ----------
                                                                                          |
INCOME BEFORE NET INTEREST CHARGES........................        113,013         22,832  |      110,054      136,598
                                                                ---------      ---------  |    ---------   ----------
                                                                                          |
NET INTEREST CHARGES:                                                                     |
   Interest on long-term debt.............................         40,774          5,615  |       33,101       37,886
   Allowance for borrowed funds used during                                               |
     construction.........................................           (470)            30  |         (574)        (477)
   Deferred interest......................................           (710)          (276) |         (321)         --
   Other interest expense ................................          2,636          1,744  |        9,219       10,638
   Subsidiary's preferred stock dividend requirements.....          7,559          1,102  |        6,248        6,656
                                                                ---------      ---------  |    ---------   ----------
     Net interest charges.................................         49,789          8,215  |       47,673       54,703
                                                                ---------      ---------  |    ---------   ----------
                                                                                          |
NET INCOME................................................      $  63,224      $  14,617  |    $  62,381   $   81,895
                                                                =========      =========  |    =========   ==========


The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

                                                           12
</TABLE>

<PAGE>

<TABLE>

                                               METROPOLITAN EDISON COMPANY

                                               CONSOLIDATED BALANCE SHEETS
<CAPTION>
As of December 31,                                                                        2002             2001
------------------------------------------------------------------------------------------------------------------
                                                                                               (In thousands)
                                         ASSETS
UTILITY PLANT:
<S>                                                                                    <C>              <C>
   In service.....................................................................     $1,620,613       $1,609,974
   Less-Accumulated provision for depreciation....................................        547,925          530,006
                                                                                       ----------       ----------
                                                                                        1,072,688        1,079,968
   Construction work in progress-
     Electric plant...............................................................         16,078           14,291
                                                                                       ----------       -----------
                                                                                        1,088,766        1,094,259
                                                                                       ----------       ----------
OTHER PROPERTY AND INVESTMENTS:
   Nuclear plant decommissioning trusts...........................................        155,690          157,699
   Long-term notes receivable from associated companies...........................         12,418           12,418
   Other..........................................................................         19,206           13,391
                                                                                       ----------       ----------
                                                                                          187,314          183,508
                                                                                       ----------       ----------
CURRENT ASSETS:
   Cash and cash equivalents......................................................         15,685           25,274
   Receivables-
     Customers (less accumulated provisions of $4,810,000 and $12,271,000
        respectively, for uncollectible accounts).................................        120,868          112,257
     Associated companies.........................................................         23,219            8,718
     Other........................................................................         18,235           16,675
   Prepayments and other..........................................................          9,731           12,239
                                                                                       ----------       ----------
                                                                                          187,738          175,163
                                                                                       ----------       ----------
DEFERRED CHARGES:
   Regulatory assets..............................................................      1,179,125        1,320,412
   Goodwill.......................................................................        885,832          784,443
   Other..........................................................................         36,030           49,402
                                                                                       ----------       ----------
                                                                                        2,100,987        2,154,257
                                                                                       ----------       ----------
                                                                                       $3,564,805       $3,607,187
                                                                                       ==========       ==========
                           CAPITALIZATION AND LIABILITIES

CAPITALIZATION (See Consolidated Statements of Capitalization):
   Common stockholder's equity....................................................     $1,315,586       $1,288,953
   Company - obligated trust preferred securities.................................         92,409           92,200
   Long-term debt.................................................................        538,790          583,077
                                                                                       ----------       ----------
                                                                                        1,946,785        1,964,230
                                                                                       ----------       ----------
CURRENT LIABILITIES:
   Currently payable long-term debt...............................................         60,467           30,029
   Short-term borrowings (Note 5)-
     Associated companies.........................................................         88,299           72,011
   Accounts payable-
     Associated companies.........................................................         56,861           67,351
     Other........................................................................         28,583           36,750
   Accrued  taxes.................................................................         16,096            7,037
   Accrued interest...............................................................         16,448           17,468
   Other..........................................................................         11,690           13,652
                                                                                       ----------       ----------
                                                                                          278,444          244,298
                                                                                       ----------       ----------
DEFERRED CREDITS:
   Accumulated deferred income taxes..............................................        316,757          300,438
   Accumulated deferred investment tax credits....................................         12,518           13,310
   Power purchase contract loss liability.........................................        660,507          730,662
   Nuclear fuel disposal costs....................................................         37,541           36,906
   Nuclear plant decommissioning costs............................................        270,611          268,967
   Other..........................................................................         41,642           48,376
                                                                                       ----------       ----------
                                                                                        1,339,576        1,398,659
                                                                                       ----------       ----------
COMMITMENTS AND CONTINGENCIES
  (Notes 3 and 6).................................................................     ----------       ----------
                                                                                       $3,564,805       $3,607,187
                                                                                       ==========       ==========

The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.

                                                           13
</TABLE>

<PAGE>

<TABLE>

                                               METROPOLITAN EDISON COMPANY

                                        CONSOLIDATED STATEMENTS OF CAPITALIZATION


<CAPTION>
As of December 31,                                                                            2002        2001
------------------------------------------------------------------------------------------------------------------
                                    (Dollars in thousands, except per share amounts)
COMMON STOCKHOLDER'S EQUITY:
<S>                                                                                       <C>           <C>
   Common stock, without par value, authorized 900,000 shares
     859,500 shares outstanding........................................................   $1,297,784    $1,274,325
   Accumulated other comprehensive income (Note 4E)....................................          (39)           11
   Retained earnings (Note 4A).........................................................       17,841        14,617
                                                                                          ----------    ----------
     Total common stockholder's equity.................................................    1,315,586     1,288,953
                                                                                          ----------    ----------

COMPANY OBLIGATED TRUST
PREFERRED SECURITIES
OF SUBSIDIARY TRUST
(NOTE 4C):
     7.35% due 2039....................................................................       92,409        92,200
                                                                                          ----------    ----------

LONG-TERM DEBT (Note 4D):
   First mortgage bonds:
     8.05% due 2002....................................................................           --        30,000
     6.60% due 2003....................................................................       20,000        20,000
     7.22% due 2003....................................................................       40,000        40,000
     9.10% due 2003....................................................................           --        30,000
     6.34% due 2004....................................................................       40,000        40,000
     6.77% due 2005....................................................................       30,000        30,000
     7.35% due 2005....................................................................       20,000        20,000
     6.36% due 2006....................................................................       17,000        17,000
     6.40% due 2006....................................................................       33,000        33,000
     6.00% due 2008....................................................................        8,700         8,700
     6.10% due 2021....................................................................       28,500        28,500
     8.60% due 2022....................................................................       30,000        30,000
     8.80% due 2022....................................................................       30,000        30,000
     6.97% due 2023....................................................................       30,000        30,000
     7.65% due 2023....................................................................       30,000        30,000
     8.15% due 2023....................................................................       60,000        60,000
     5.95% due 2027....................................................................       13,690        13,690
                                                                                          ----------    ----------
       Total first mortgage bonds......................................................      430,890       490,890

   Secured note:
     5.72% due 2006....................................................................      100,000       100,000
     5.93% due 2007....................................................................       50,000            --
                                                                                          -----------   ----------
       Total Secured notes.............................................................      150,000       100,000

   Unsecured note:
     7.69% due 2039....................................................................        5,968         5,997

   Net unamortized premium on debt.....................................................       12,399        16,219
   Long-term debt due within one year..................................................      (60,467)      (30,029)
                                                                                          ----------    ----------
       Total long-term debt ...........................................................      538,790       583,077
                                                                                          ----------    ----------
TOTAL CAPITALIZATION...................................................................   $1,946,785    $1,964,230
                                                                                          ==========    ==========


The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

                                                           14

</TABLE>

<PAGE>

<TABLE>
                                               METROPOLITAN EDISON COMPANY

                                 CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY

<CAPTION>
                                                                  Common Stock                Accumulated
                                                                -----------------    Other       Other
                                               Comprehensive    Number   Carrying   Paid-In  Comprehensive  Retained
                                                   Income      of Shares   Value    Capital  Income (Loss)  Earnings
                                               -------------   --------- --------   -------  -------------  ---------
                                                                        (Dollars in thousands)

<S>                                                <C>         <C>      <C>         <C>         <C>         <C>
Balance, January 1, 2000.......................                859,500  $  66,273   $400,200    $21,363     $  13,581
   Net income..................................    $81,895                                                     81,895
   Net unrealized gain (loss) on investments...    (21,295)                                     (21,295)
   Minimum pension liability...................         (4)                                          (4)
                                                   -------
   Comprehensive income........................     60,596
                                                   -------
   Cash dividends on common stock..............                                                               (25,000)
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000.....................                859,500     66,273    400,200         64        70,476
   Net income..................................     62,381                                                     62,381
   Net unrealized gain (loss) on investments...          5                                            5
   Net unrealized gain (loss) on derivative
     instruments...............................       (174)                                        (174)
                                                   -------
   Comprehensive income........................     62,212
                                                   -------
   Cash dividends on common stock..............                                                               (65,000)
---------------------------------------------------------------------------------------------------------------------
Balance, November 6, 2001......................                859,500     66,273    400,200       (105)       67,857
   Purchase accounting fair value adjustment...                         1,208,052   (400,200)       105       (67,857)
---------------------------------------------------------------------------------------------------------------------
Balance, November 7, 2001......................                859,500  1,274,325         --         --            --
   Net income..................................     14,617                                                     14,617
   Net unrealized gain (loss) on investments...         22                                           22
   Net unrealized gain (loss) on derivative
      instruments..............................        (11)                                         (11)
                                                   -------
   Comprehensive income........................     14,628
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001.....................                859,500  1,274,325         --         11        14,617
   Net income..................................     63,224                                                     63,224
   Net unrealized gain (loss) on investments...         17                                           17
   Net unrealized gain (loss) on derivative
     instruments...............................        (67)                                         (67)
                                                   -------
   Comprehensive income........................    $63,174
                                                   -------
   Cash dividends on common stock..............                                                               (60,000)
   Purchase accounting fair value adjustment...                            23,459
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002.....................                859,500 $1,297,784   $     --    $   (39)    $  17,841
=====================================================================================================================

</TABLE>


                     CONSOLIDATED STATEMENTS OF PREFERRED STOCK

                                                          Subject to
                                                      Mandatory Redemption
                                                      ---------------------
                                                        Number     Carrying
                                                      of Shares     Value
                                                      ---------    --------
                                                     (Dollars in thousands)

             Balance, January 1, 2000............    4,000,000   $100,000
             ==============================================================
             Balance, December 31, 2000..........    4,000,000    100,000
             ==============================================================
               Purchase accounting fair
                   value adjustment..............                  (7,800)
             --------------------------------------------------------------
             Balance, December 31, 2001..........    4,000,000     92,200
               Amortization of fair market
                   value adjustment..............                     209
             --------------------------------------------------------------
             Balance, December 31, 2002..........    4,000,000   $ 92,409
             ==============================================================



The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.

                                                           15

<PAGE>
<TABLE>

                                               METROPOLITAN EDISON COMPANY

                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                   Nov. 7 -      Jan. 1 -
                                                                        2002     Dec. 31, 2001  Nov. 6, 2001   2000
-----------------------------------------------------------------------------------------------------------------------
                                                                                      (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                 <C>           <C>           <C>         <C>
Net Income                                                          $  63,224     $ 14,617   |  $ 62,381    $ 81,895
   Adjustments to reconcile net income to net                                                |
    cash from operating activities:                                                          |
     Provision for depreciation and amortization................       81,419        8,903   |    51,867      68,695
     Other amortization.........................................       (2,528)         154   |     1,147       5,684
     Impact of PPUC rate order, net.............................           --           --   |        --     (44,580)
     Deferred costs recoverable as regulatory assets............      (18,938)       1,045   |   (91,182)     (7,941)
     Deferred income taxes, net.................................       23,356          906   |    53,464      22,483
     Investment tax credits, net................................         (792)        (128)  |      (721)       (851)
     Receivables................................................      (24,672)      10,213   |    33,714      33,348
     Accounts payable...........................................      (18,657)      (4,339)  |   (60,868)    (48,395)
     Other (Note 7).............................................         (538)       8,286   |   (59,313)    (25,896)
                                                                    ---------     --------   |  --------    --------
       Net cash provided from (used for) operating activities...      101,874       39,657   |    (9,511)     84,442
                                                                    ---------     --------   |  --------    --------
                                                                                             |
CASH FLOWS FROM FINANCING ACTIVITIES:                                                        |
   New Financing-                                                                            |
     Long-term debt.............................................       49,750           --   |    99,500          --
     Short-term borrowings, net.................................       16,288           --   |    51,400      46,600
   Redemptions and Repayments-                                                               |
     Long-term debt.............................................      (60,000)          --   |        --     (50,000)
     Short-term borrowings, net.................................           --      (25,989)  |        --          --
   Dividend Payments-                                                                        |
     Common stock...............................................      (60,000)          --   |   (65,000)    (25,000)
                                                                    ---------     ---------  |  --------    --------
       Net cash provided from (used for) financing activities...      (53,962)     (25,989)  |    85,900     (28,400)
                                                                    ---------     --------   |  --------    --------
                                                                                             |
CASH FLOWS FROM INVESTING ACTIVITIES:                                                        |
   Property additions...........................................      (44,533)      (7,787)  |   (47,660)    (58,481)
   Contributions to decommissioning trusts......................           --           --   |    (7,113)     (8,700)
   Sale of investments..........................................           --           --   |        --       3,519
   Other........................................................      (12,968)        (453)  |    (5,209)         --
                                                                    ---------     --------   |  --------    --------
       Net cash provided from (used for) investing activities...      (57,501)      (8,240)  |   (59,982)    (63,662)
                                                                    ---------     --------   |  --------    --------
                                                                                             |
                                                                                             |
Net increase (decrease) in cash and cash equivalents............       (9,589)       5,428   |    16,407      (7,620)
Cash and cash equivalents at beginning of period................       25,274       19,846   |     3,439      11,059
                                                                    ---------      -------   |  --------    --------
Cash and cash equivalents at end of period......................    $  15,685      $25,274   |  $ 19,846    $  3,439
                                                                    =========      =======   |  ========    ========
                                                                                             |
SUPPLEMENTAL CASH FLOWS INFORMATION:                                                         |
Cash Paid During the Year-                                                                   |
     Interest (net of amounts capitalized)......................    $  46,266      $  --     |  $ 41,473    $ 47,451
                                                                    =========      =======   |  ========    ========
     Income taxes (refund)......................................    $  34,385      $(2,990)  |  $  7,486    $ 45,534
                                                                    =========      =======   |  ========    ========


The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

                                                           16

</TABLE>

<PAGE>

<TABLE>
                                               METROPOLITAN EDISON COMPANY

                                            CONSOLIDATED STATEMENTS OF TAXES

<CAPTION>
                                                                                   Nov. 7 -      Jan. 1 -
                                                                       2002     Dec. 31, 2001  Nov. 6, 2001    2000
-----------------------------------------------------------------------------------------------------------------------
                                                                                      (In thousands)
GENERAL TAXES:
<S>                                                                 <C>            <C>          <C>         <C>
Real and personal property......................................    $   1,384      $       5  | $  1,236    $  1,826
State gross receipts *..........................................       56,043          5,730  |   31,353      35,288
Social security and unemployment................................            1             (1) |       14          --
Other...........................................................        9,367            775  |    7,242       5,509
                                                                    ---------      ---------  | --------    --------
       Total general taxes......................................    $  66,795      $   6,509  | $ 39,845    $ 42,623
                                                                    =========      =========  | ========    ========
                                                                                              |
PROVISION FOR INCOME TAXES:                                                                   |
Currently payable-                                                                            |
   Federal......................................................    $  15,371      $   7,693  | $(11,534)   $ 17,080
   State........................................................        6,437          2,433  |   (1,760)      5,377
                                                                    ---------      ---------  | --------    --------
                                                                       21,808         10,126  |  (13,294)     22,457
                                                                    ---------      ---------  | --------    --------
Deferred, net-                                                                                |
   Federal......................................................       19,615            934  |   41,297      19,476
   State........................................................        3,741            (28) |   12,167       3,007
                                                                    ---------      ---------- | ---------   --------
                                                                       23,356            906  |   53,464      22,483
                                                                    ---------      ---------  | --------    --------
Investment tax credit amortization..............................         (792)          (128) |     (721)       (851)
                                                                    ---------      ---------  | --------    --------
       Total provision for income taxes.........................    $  44,372      $  10,904  | $ 39,449    $ 44,089
                                                                    =========      ========== | ========    ========
                                                                                              |
INCOME STATEMENT CLASSIFICATION                                                               |
OF PROVISION FOR INCOME TAXES:                                                                |
Operating income................................................    $  27,447      $  11,584  | $ 28,549    $ 33,278
Other income....................................................       16,925           (680) |   10,900      10,811
                                                                   ----------      ---------  | --------    --------
       Total provision for income taxes.........................    $  44,372      $  10,904  | $ 39,449    $ 44,089
                                                                    =========      =========  | ========    ========
                                                                                              |
RECONCILIATION OF FEDERAL INCOME TAX                                                          |
EXPENSE AT STATUTORY RATE TO TOTAL                                                            |
PROVISION FOR INCOME TAXES:                                                                   |
Book income before provision for income taxes...................     $107,596      $  25,521  | $101,831    $125,983
                                                                    =========      =========  | ========    ========
Federal income tax expense at statutory rate....................    $  37,659      $   8,932  | $ 35,641    $ 44,094
Increases (reductions) in taxes resulting from-                                               |
   Amortization of investment tax credits.......................         (792)          (128) |     (721)       (851)
   Depreciation.................................................        1,362            304  |      926         300
   State income tax, net of federal benefit.....................        6,107            938  |    7,388       7,379
   Allocated share of consolidated tax savings..................           --             --  |   (3,151)         --
   Other, net...................................................           36            858  |     (634)     (6,833)
                                                                    ---------      ---------  | --------    --------
       Total provision for income taxes.........................    $  44,372      $  10,904  | $ 39,449    $ 44,089
                                                                    =========      =========  | ========    ========
                                                                                              |
ACCUMULATED DEFERRED INCOME TAXES AT                                                          |
DECEMBER 31:                                                                                  |
Property basis differences......................................    $ 217,351      $ 211,394  |             $203,352
Nuclear decommissioning.........................................       (4,247)        (5,623) |               (9,797)
Deferred sale and leaseback costs...............................      (11,366)       (12,077) |              (11,298)
Non-utility generation costs....................................       (4,832)        36,099  |               12,238
Purchase accounting basis difference............................         (642)       (37,143) |                   --
Sale of generation assets.......................................       (1,419)        (1,420) |               (1,397)
Regulatory transition charge....................................       88,315         85,414  |               69,828
Customer receivables for future income taxes....................       50,259         49,755  |               51,247
Other...........................................................      (16,662)       (25,961) |              (35,164)
                                                                    ---------      ---------  |             --------
       Net deferred income tax liability........................    $ 316,757      $ 300,438  |             $279,009
                                                                    =========      =========  |             ========


* Collected from customers through regulated rates and included in revenue on the Consolidated Statements of Income.


The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.


                                                           17

</TABLE>

<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

        The  consolidated   financial  statements  include  Metropolitan  Edison
Company   (Company)  and  its  wholly  owned   subsidiaries.   All   significant
intercompany  transactions  have been eliminated.  The Company is a wholly owned
subsidiary  of  FirstEnergy  Corp.  FirstEnergy  also holds  directly all of the
issued and outstanding  common shares of Ohio Edison Company (OE), The Cleveland
Electric  Illuminating  Company (CEI), The Toledo Edison Company (TE),  American
Transmission  Systems, Inc. (ATSI), Jersey Central Power & Light Company (JCP&L)
and Pennsylvania Electric Company (Penelec). The Company, JCP&L and Penelec were
formerly wholly owned  subsidiaries of GPU, Inc.,  which merged with FirstEnergy
on November 7, 2001.  Pre-merger period and post-merger period financial results
are separated by a heavy black line.

        The Company follows the accounting policies and practices  prescribed by
the Securities and Exchange  Commission  (SEC), the Pennsylvania  Public Utility
Commission  (PPUC) and the Federal  Energy  Regulatory  Commission  (FERC).  The
preparation of financial  statements in conformity  with  accounting  principles
generally  accepted in the United  States  (GAAP)  requires  management  to make
periodic  estimates and assumptions  that affect the reported amounts of assets,
liabilities,  revenues and expenses and the disclosure of contingent  assets and
liabilities.  Actual  results could differ from these  estimates.  Certain prior
year  amounts  have  been   reclassified   to  conform  with  the  current  year
presentation.

   (A)  CONSOLIDATION-

        The  Company   consolidates  all  majority-owned   subsidiaries,   after
eliminating  the  effects  of  intercompany  transactions.   Non-majority  owned
investments,  including investments in limited liability companies, partnerships
and joint  ventures,  are accounted for under the equity method when the Company
is able to  influence  their  financial or operating  policies.  Investments  in
corporations  resulting  in voting  control  of 20% or more are  presumed  to be
equity method investments. Limited partnerships are evaluated in accordance with
SEC Staff D-46,  "Accounting for Limited  Partnership  Investments" and American
Institute of Certified Public  Accountants  (AICPA)  Statement of Position (SOP)
78-9, "Accounting for Investments in Real Estate Ventures," which specify a 3 to
5  percent  threshold  for the  presumption  of  influence.  For  all  remaining
investments  (excluding  those  within  the  scope  of  Statement  of  Financial
Accounting Standards (SFAS) 115, the Company applies the cost method.

   (B)  REVENUES-

        The  Company's  principal  business  is  providing  electric  service to
customers in Pennsylvania. The Company's retail customers are metered on a cycle
basis.  Revenue is recognized for unbilled electric service provided through the
end of the year. See Note 7 - Other  Information  for discussion of reporting of
independent system operator transactions.

        Receivables from customers include sales to residential,  commercial and
industrial  customers  and sales to wholesale  customers.  There was no material
concentration  of receivables  as of December 31, 2002 or 2001,  with respect to
any particular segment of the Company's customers.

   (C)  REGULATORY PLAN-

        Pennsylvania  enacted its electric utility  competition law in 1996 with
the phase-in of customer choice for generation suppliers completed as of January
1, 2001. In 1998, the PPUC authorized a rate  restructuring plan for the Company
which  essentially  resulted in the  deregulation  of the  Company's  generation
business. The Company has a continuing  responsibility to provide power to those
customers not choosing to receive  power from an  alternative  energy  supplier,
subject to certain  limits,  which is referred to as the  Company's  provider of
last resort  (PLR)  obligation.  In 2000,  the PPUC  disallowed a portion of the
requested additional stranded costs above those amounts granted in the Company's
1998 rate  restructuring  plan order.  The PPUC  required the Company to seek an
Internal   Revenue  Service  (IRS)  ruling   regarding  the  return  of  certain
unamortized  investment tax credits and excess  deferred  income tax benefits to
customers. If the IRS ruling ultimately supports returning these tax benefits to
customers,  there  would be no  effect to the  Company's  net  income  since the
contingency existed prior to the Company being acquired by FirstEnergy.

        As a result of its generating asset  divestitures,  the Company obtained
its  supply of  electricity  to meet its PLR  obligation  almost  entirely  from
contracted and open market purchases. In 2000, the Company filed a petition with
the PPUC  seeking  permission  to defer,  for future  recovery,  energy costs in
excess  of  amounts   reflected  in  its  capped   generation  rates;  the  PPUC
subsequently consolidated this petition in January 2001 with the FirstEnergy/GPU
merger proceeding (see Note 2 - Merger).

        In  June  2001,  the  PPUC  entered  orders   approving  the  Settlement
Stipulation with all of the major parties in the combined merger and rate relief
proceedings  which approved the merger and provided the Company PLR rate relief.

                                       18

<PAGE>


The PPUC  permitted the Company to defer,  for future  recovery,  the difference
between its actual  energy costs and those  reflected  in its capped  generation
rates, retroactive to January 1, 2001. Correspondingly, in the event that energy
costs  incurred  by the Company  were below its capped  generation  rates,  that
difference  would have  reduced  costs that had been  deferred  for  recovery in
future periods. However, this PLR deferral accounting procedure was subsequently
denied in a court  decision,  as discussed  below.  The Company's PLR obligation
extends  through  December  31,  2010.  Had the PLR  accounting  procedure  been
allowed, competitive transition charge (CTC) revenues would have been applied to
the Company's PLR stranded costs during that period. The Company would have been
permitted to recover any remaining  stranded costs through a continuation of the
CTC after December 31, 2010 through no later than December 31, 2015. Any amounts
not expected to be recovered by December 31, 2015 would have been written off at
the time such nonrecovery became probable.

        Several  parties  had filed  Petitions  for Review in June and July 2001
with the Commonwealth Court of Pennsylvania regarding the June 2001 PPUC orders.
On February  21,  2002,  the Court  affirmed  the PPUC  decision  regarding  the
FirstEnergy/GPU merger,  remanding the decision to the PPUC only with respect to
the issue of merger savings.  The Court reversed the PPUC's  decision  regarding
the Company's PLR  obligation,  and rejected those parts of the settlement  that
permitted the Company to defer for accounting  purposes the  difference  between
its wholesale power costs and the amount that it collects from retail customers.
The Company and the PPUC each filed a Petition for  Allowance of Appeal with the
Pennsylvania  Supreme  Court  on  March  25,  2002,  asking  it  to  review  the
Commonwealth  Court  decision.  Also on March 25, 2002,  Citizens  Power filed a
motion  seeking an appeal of the  Commonwealth  Court's  decision  to affirm the
FirstEnergy/GPU merger with the Pennsylvania Supreme Court. In the first quarter
of 2002, the Company  established a $103.0 million  reserve for its PLR deferred
energy costs  incurred  prior to its  acquisition  by  FirstEnergy.  The reserve
reflected the potential adverse impact of a pending  Pennsylvania  Supreme Court
decision whether to review the Commonwealth  Court ruling. The reserve increased
goodwill  by an  aggregate  net of tax amount of $60.3  million.  On January 17,
2003, the Pennsylvania  Supreme Court denied further appeals of the February 21,
2002 Pennsylvania  Commonwealth Court decision,  which effectively  affirmed the
PPUC's order  approving the merger  between  FirstEnergy  and GPU, let stand the
Commonwealth  Court's denial of PLR rate relief for the Company and remanded the
merger savings issue back to the PPUC.

        Effective September 1, 2002, the Company assigned its PLR responsibility
to FES through a wholesale power sale agreement.  The PLR sale,  which initially
ran through the end of 2002,  was  extended  through  December  2003 and will be
automatically extended for each successive calendar year unless any party elects
to cancel the agreement by November 1 of the preceding year.  Under the terms of
the wholesale agreement, FES assumes the supply obligation and the energy supply
profit  and  loss  risk  for  the  portion  of  power  supply  requirements  not
self-supplied  by the Company under its non-utility  generation  (NUG) contracts
and other existing power  contracts with  nonaffiliated  third party  suppliers.
This arrangement  reduces the Company's  exposure to high wholesale power prices
by  providing  power at or below the  shopping  credit for its  uncommitted  PLR
energy  costs  during  the  term of the  agreement  with  FES.  The  Company  is
authorized  to continue  deferring  differences  between NUG contract  costs and
amounts recovered through its capped generation rates.

        The application of SFAS 71, "Accounting for the Effects of Certain Types
of  Regulation,"  was  discontinued  in  1998  with  respect  to  the  Company's
generation  operations.  The Company subsequently divested  substantially all of
its generating  assets.  The SEC issued  interpretive  guidance  regarding asset
impairment  measurement,  concluding that any supplemental  regulated cash flows
such as a CTC should be  excluded  from the cash flows of assets in a portion of
the business not subject to regulatory accounting practices. If those assets are
impaired,  a regulatory asset should be established if the costs are recoverable
through  regulatory cash flows. Net assets included in utility plant relating to
the operations for which the  application of SFAS 71 was  discontinued  were $17
million as of December 31, 2002.

   (D)  PROPERTY, PLANT AND EQUIPMENT-

        As a result of the merger,  a portion of the Company's  property,  plant
and equipment was adjusted to reflect fair value.  The majority of the Company's
property,  plant and equipment  continues to be reflected at original cost since
such assets remain subject to rate  regulation on a historical  cost basis.  The
Company's  accounting  policy  for  planned  major  maintenance  projects  is to
recognize liabilities as they are incurred.

        The  Company  provides  for  depreciation  on a  straight-line  basis at
various rates over the estimated lives of property included in plant in service.
The annualized  composite rate was approximately  3.0% in 2002, 3.0% in 2001 and
2.9% in 2000.

        Annual depreciation expense in 2002 included  approximately $9.5 million
for future decommissioning costs applicable to the Company's ownership in Unit 2
of the Three Mile Island Nuclear Plant (TMI-2), a demonstration  nuclear reactor
(Saxton Nuclear Experimental Facility) owned by a wholly owned subsidiary of the
Company (in conjunction with JCP&L and Penelec) and decommissioning  liabilities
for its previously divested nuclear generating units. The Company's share of the
future obligation to decommission these units is approximately $261.2 million in
current dollars and (using a 4.0% escalation rate) approximately  $417.2 million
in  future  dollars.  The  estimated  obligation  and the  escalation  rate

19

<PAGE>

were  developed  based  on  site  specific  studies.   Decommissioning   of  the
demonstration  nuclear reactor is expected to be completed in 2003; payments for
decommissioning  of the nuclear  generating units are expected to begin in 2014,
when actual decommissioning work is expected to begin. The Company has recovered
approximately  $66.6  million for future  decommissioning  through its  electric
rates from customers  through December 31, 2002. The Company has also recognized
an estimated  liability of approximately $3.7 million related to decontamination
and  decommissioning  of nuclear  enrichment  facilities  operated by the United
States Department of Energy (DOE), as required by the Energy Policy Act of 1992.

        In June 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations".  The new statement  provides  accounting  standards for retirement
obligations  associated with tangible  long-lived assets, with adoption required
by January 1, 2003.  SFAS 143 requires that the fair value of a liability for an
asset  retirement  obligation be recorded in the period in which it is incurred.
The associated  asset  retirement  costs are capitalized as part of the carrying
amount of the long-lived  asset. Over time the capitalized costs are depreciated
and the present value of the asset retirement liability increases,  resulting in
a period expense.  However,  rate-regulated  entities may recognize a regulatory
asset or liability  instead,  if the criteria for such  treatment  are met. Upon
retirement,  a gain or  loss  would  be  recorded  if the  cost  to  settle  the
retirement obligation differs from the carrying amount.

        The Company has identified applicable legal obligations as defined under
the new  standard,  principally  for nuclear power plant  decommissioning.  Upon
adoption of SFAS 143, asset retirement costs of $186 million will be recorded as
part  of the  carrying  amount  of  the  related  long-lived  asset,  offset  by
accumulated  depreciation of $186 million.

        The asset  retirement  liability  at the date of  adoption  will be $198
million.  As of December  31,  2002,  the Company had  recorded  decommissioning
liabilities of $260 million.  The change in the estimated  liabilities  resulted
from changes in methodology and various  assumptions,  including  changes in the
projected dates for decommissioning.

        Management expects that the Company's  ultimate nuclear  decommissioning
costs will be tracked and recovered  through  regulated  rates.  Therefore,  the
Company  recognized a regulatory  liability of $61 million upon adoption of SFAS
143 for the transition  amounts  related to  establishing  the asset  retirement
obligations  for  nuclear  decommissioning.   The  remaining  cumulative  effect
adjustment to recognize the  undepreciated  asset  retirement cost and the asset
retirement   liability  offset  by  the  reversal  of  the  previously  recorded
decommissioning  liabilities  was a $0.4  million  increase  to income,  or $0.2
million net of tax.

        The FASB  approved  SFAS  141,  "Business  Combinations"  and SFAS  142,
"Goodwill and Other Intangible  Assets," on June 29, 2001. SFAS 141 requires all
business  combinations  initiated after June 30, 2001, to be accounted for using
purchase  accounting.  The  provisions  of  the  new  standard  relating  to the
determination of goodwill and other  intangible  assets have been applied to the
FirstEnergy/GPU  merger, which was accounted for as a purchase transaction,  and
have not materially  affected the accounting  for this  transaction.  Under SFAS
142, amortization of existing goodwill ceased January 1, 2002. Instead, goodwill
is tested for  impairment  at least on an annual basis - based on the results of
the  transition  analysis and the 2002 annual  analysis,  no  impairment  of the
Company's goodwill is required.

   (E)  STOCK-BASED COMPENSATION-

        FirstEnergy  applies  the  recognition  and  measurement  principles  of
Accounting  Principles  Board  Opinion  No. 25 (APB 25),  "Accounting  for Stock
Issued  to  Employees"  and  related   Interpretations  in  accounting  for  its
stock-based  compensation plans (see Note 4B). No material  stock-based employee
compensation  expense is  reflected in net income as all options  granted  under
those plans had an exercise  price equal to the market  value of the  underlying
common stock on the grant date, resulting in substantially no intrinsic value.

        If  FirstEnergy  had accounted for employee stock options under the fair
value method,  a higher value would have been  assigned to the options  granted.
The weighted average assumptions used in valuing the options and their resulting
estimated fair values would be as follows:

                                       2002           2001            2000
  -----------------------------------------------------------------------------
   Valuation assumptions:
     Expected option term (years)       8.1            8.3             7.6
     Expected volatility.........     23.31%         23.45%          21.77%
     Expected dividend yield.....      4.36%          5.00%           6.68%
     Risk-free interest rate.....      4.60%          4.67%           5.28%
   Fair value per option.........     $6.45          $4.97           $2.86
   ----------------------------------------------------------------------------

                                       20

<PAGE>


        The effects of applying fair value accounting to the FirstEnergy's stock
options would not materially effect the Company's net income.

   (F)  INCOME TAXES-

        Details  of the  total  provision  for  income  taxes  are  shown on the
Consolidated  Statements  of Taxes.  Deferred  income  taxes  result from timing
differences  in the  recognition of revenues and expenses for tax and accounting
purposes.  Investment tax credits,  which were deferred when utilized, are being
amortized over the recovery period of the related property. The liability method
is used to account for deferred  income taxes.  Deferred  income tax liabilities
related to tax and accounting basis  differences are recognized at the statutory
income tax rates in effect when the liabilities are expected to be paid. Results
for the period  January 1, 2001  through  November 6, 2001 were  included in the
final consolidated  federal income tax return of GPU, and results for the period
November 7, 2001 through December 31, 2001 were included in  FirstEnergy's  2001
consolidated  federal  income tax return.  The  consolidated  tax  liability  is
allocated on a "stand-alone" company basis, with the Company recognizing the tax
benefit for any tax losses or credits it contributed to the consolidated return.

   (G)  RETIREMENT BENEFITS-

        Effective  December 31, 2001, the Company's defined benefit pension plan
was merged  into  FirstEnergy's  defined  benefit  pension  plan.  FirstEnergy's
trusteed,  noncontributory defined benefit pension plan covers almost all of the
Company's  full-time  employees.  Upon retirement,  employees  receive a monthly
pension  based on length  of  service  and  compensation.  FirstEnergy  uses the
projected  unit credit  method for funding  purposes.  The assets of the pension
plan consist  primarily of common  stocks,  United States  government  bonds and
corporate  bonds.  Costs for the year 2001  include  the former  GPU  companies'
pension and other  postretirement  benefit costs for the period November 7, 2001
through December 31, 2001.

        The Company provides a minimum amount of noncontributory  life insurance
to retired employees in addition to optional contributory insurance. Health care
benefits,   which  include  certain  employee  contributions,   deductibles  and
copayments, are also available to retired employees, their dependents and, under
certain circumstances,  their survivors.  The Company pays insurance premiums to
cover a portion of these benefits in excess of set limits; all amounts up to the
limits are paid by the Company.  The Company  recognizes  the  expected  cost of
providing other postretirement benefits to employees and their beneficiaries and
covered  dependents from the time employees are hired until they become eligible
to receive those benefits.

        The  following  sets  forth the funded  status of the plans and  amounts
recognized on FirstEnergy's Consolidated Balance Sheet as of December 31:

                                       21

<PAGE>

<TABLE>

<CAPTION>
                                                                                            Other
                                                            Pension Benefits        Postretirement Benefits
                                                            ----------------        -----------------------
                                                            2002        2001          2002         2001
-----------------------------------------------------------------------------------------------------------
                                                                           (In millions)
              Change in benefit obligation:
             <S>                                          <C>         <C>          <C>          <C>
              Benefit obligation as of January 1......... $3,547.9    $1,506.1     $ 1,581.6    $   752.0
              Service cost...............................     58.8        34.9          28.5         18.3
              Interest cost..............................    249.3       133.3         113.6         64.4
              Plan amendments............................     --           3.6        (121.1)        --
              Actuarial loss.............................    268.0       123.1         440.4         73.3
              Voluntary early retirement program.........     --          --            --            2.3
              GPU acquisition............................    (11.8)    1,878.3         110.0        716.9
              Benefits paid..............................   (245.8)     (131.4)        (83.0)       (45.6)
              -------------------------------------------------------------------------------------------
              Benefit obligation as of December 31.......  3,866.4     3,547.9       2,070.0      1,581.6
              -------------------------------------------------------------------------------------------

              Change in fair value of plan assets:
              Fair value of plan assets as of January 1..  3,483.7     1,706.0         535.0         23.0
              Actual return on plan assets...............   (348.9)        8.1         (57.1)        12.7
              Company contribution.......................     --          --            37.9         43.3
              GPU acquisition............................     --       1,901.0          --          462.0
              Benefits paid..............................   (245.8)     (131.4)        (42.5)        (6.0)
              -------------------------------------------------------------------------------------------
              Fair value of plan assets as of December 31  2,889.0     3,483.7         473.3        535.0
              -------------------------------------------------------------------------------------------

              Funded status of plan......................   (977.4)      (64.2)     (1,596.7)    (1,046.6)
              Unrecognized actuarial loss................  1,185.8       222.8         751.6        212.8
              Unrecognized prior service cost............     78.5        87.9        (106.8)        17.7
              Unrecognized net transition obligation.....     --          --            92.4        101.6
              -------------------------------------------------------------------------------------------
              Net amount recognized...................... $  286.9    $  246.5     $  (859.5)   $  (714.5)
              ===========================================================================================

              Consolidated Balance Sheets classification:
              Prepaid (accrued) benefit cost............. $ (548.6)   $  246.5     $  (859.5)   $  (714.5)
              Intangible asset...........................     78.5        --            --           --
              Accumulated other comprehensive loss.......    757.0        --            --           --
              -------------------------------------------------------------------------------------------
              Net amount recognized...................... $  286.9    $  246.5     $  (859.5)   $  (714.5)
              ============================================================================================

              Assumptions used as of December 31:
              Discount rate..............................     6.75%       7.25%         6.75%       7.25%
              Expected long-term return on plan assets...     9.00%      10.25%         9.00%      10.25%
              Rate of compensation increase..............     3.50%       4.00%         3.50%       4.00%


        Net pension  and other  postretirement  benefit  costs for the two years
ended December 31, 2002 were computed as follows:

<CAPTION>

                                                                                        Other
                                                     Pension Benefits           Postretirement Benefits
                                                   --------------------         -----------------------
                                                      2002        2001             2002        2001
     ---------------------------------------------------------------------------------------------------
                                                                     (In millions)

     <S>                                            <C>         <C>             <C>           <C>
     Service cost...........................        $  58.8     $  34.9         $  28.5       $18.3
     Interest cost..........................          249.3       133.3           113.6        64.4
     Expected return on plan assets.........         (346.1)     (204.8)          (51.7)       (9.9)
     Amortization of transition obligation (asset)      --         (2.1)            9.2         9.2
     Amortization of prior service cost.....            9.3         8.8             3.2         3.2
     Recognized net actuarial loss (gain)...            --          --             11.2         4.9
     Voluntary early retirement program.....            --          6.1             --          2.3
     ---------------------------------------------------------------------------------------------------
     Net periodic benefit cost (income).....        $ (28.7)    $ (23.8)         $114.0       $92.4
     ===================================================================================================

</TABLE>


        The composite  health care cost trend rate  assumption is  approximately
10%-12% in 2003,  9% in 2004 and 8% in 2005,  decreasing  to 5% in later  years.
Assumed  health care cost trend rates have a  significant  effect on the amounts
reported  for the health  care plan.  An  increase in the health care cost trend
rate  assumption by one  percentage  point would  increase the total service and
interest  cost  components  by  $20.7  million  and the  postretirement  benefit
obligation  by  $232.2  million.  A  decrease  in  the  same  assumption  by one
percentage  point would decrease the total service and interest cost  components
by $16.7 million and the postretirement benefit obligation by $204.3 million.

        A significant  portion of the services  provided to the Company are from
affiliates, GPU Service, Inc. (GPUS) and FirstEnergy Service Company (FECO) (see
Note 1H).  Therefore,  substantially  all of the  employees  are with GPUS which
bills the Company for services rendered. See Note 7D for the Company's amount of
net pension and other postretirement benefit costs reflected in its Consolidated
Statements of Income.

                                       22

<PAGE>


   (H)  TRANSACTIONS WITH AFFILIATED COMPANIES-

        Operating   revenues,   operating  expenses  and  other  income  include
transactions with affiliated companies, primarily GPUS and FES. During the three
years ended December 31, 2002,  GPUS provided legal,  accounting,  financial and
other  services to the Company.  The Company also entered into sale and purchase
transactions  with affiliates  (JCP&L and Penelec) during the period.  Effective
September 1, 2002, the Company assigned its PLR  responsibility to FES through a
wholesale   power  sale  agreement.   See  Note  7  for  affiliated   companies'
transactions schedule.

        FirstEnergy  does not bill  directly or allocate any of its costs to any
subsidiary company. Costs are allocated to the Company from its affiliates, GPUS
and FECO,  both  subsidiaries  of  FirstEnergy  Corp.  and both "mutual  service
companies" as defined in Rule 93 of the 1935 Public Utility  Holding Company Act
(PUHCA).  The vast majority of costs are directly  billed or assigned at no more
than cost as determined  by PUHCA Rule 91. The remaining  costs are for services
that are  provided on behalf of more than one  company,  or costs that cannot be
precisely  identified  and are allocated  using formulas that are filed annually
with the SEC on Form U-13-60. The current allocation or assignment formulas used
and their bases include  multiple factor  formulas:  the ratio of each company's
amount of  FirstEnergy's  aggregate direct payroll,  number of employees,  asset
balances,  revenues,  number  of  customers  and  other  factors;  and  specific
departmental  charge ratios.  Management  believes that these allocation methods
are reasonable.

   (I)  SUPPLEMENTAL CASH FLOWS INFORMATION-

        All temporary cash  investments  purchased  with an initial  maturity of
three  months  or less are  reported  as cash  equivalents  on the  Consolidated
Balance Sheets at cost, which approximates their fair market value.

        All borrowings with initial maturities of less than one year are defined
as financial instruments under GAAP and are reported on the Consolidated Balance
Sheets at cost, which  approximates  their fair market value. The following sets
forth the  approximate  fair  value and  related  carrying  amounts of all other
long-term debt,  preferred stock subject to mandatory redemption and investments
other than cash and cash equivalents as of December 31:

                                             2002                   2001
-----------------------------------------------------------------------------
                                     Carrying     Fair      Carrying   Fair
                                      Value       Value      Value     Value
-----------------------------------------------------------------------------
                                                   (In millions)
 Long-term debt....................     $587      $598       $597       $601
 Preferred stock...................     $ 92      $100       $100       $ 93
 Investments other than cash
    and cash equivalents...........     $156      $156       $159       $160
-----------------------------------------------------------------------------

        The fair  values of  long-term  debt and  preferred  stock  reflect  the
present value of the cash  outflows  relating to those  securities  based on the
current  call  price,  the yield to  maturity  or the  yield to call,  as deemed
appropriate at the end of each respective year. The yields assumed were based on
securities  with similar  characteristics  offered by  corporations  with credit
ratings  similar to the Company's  ratings.  Long-term debt and preferred  stock
subject to mandatory redemption were recognized at fair value in connection with
the merger.

        The fair  value of  investments  other  than  cash and cash  equivalents
represent cost (which  approximates fair value) or the present value of the cash
inflows  based on the  yield to  maturity.  The  yields  assumed  were  based on
financial instruments with similar characteristics and terms.  Investments other
than cash and cash equivalents include  decommissioning  trust investments.  The
Company has no securities held for trading purposes.

        The  investment  policy  for the  nuclear  decommissioning  trust  funds
restricts  or limits  the  ability  to hold  certain  types of assets  including
private or direct placements,  warrants, securities of FirstEnergy,  investments
in companies  owning  nuclear power  plants,  financial  derivatives,  preferred
stocks,  securities  convertible  into common stock and  securities of the trust
fund's custodian or managers and their parents or subsidiaries.  The investments
that are held in the decommissioning trusts (included as "Investments other than
cash and cash  equivalents"  in the table above)  consist of equity  securities,
government bonds and corporate bonds.  Unrealized gains and losses applicable to
the  decommissioning  trusts have been recognized in the trust investment with a
corresponding change to the decommissioning  liability.  Realized gains (losses)
are recognized as additions  (reductions) to trust asset balances.  For the year
2002,  net  realized  losses were  approximately  $0.4  million and interest and
dividend income totaled approximately $4.7 million.

        On  January 1, 2001,  the  Company  adopted  SFAS 133,  "Accounting  for
Derivative  Instruments  and  Hedging  Activities,"  as  amended  by  SFAS  138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities --
an  amendment  of  FASB  Statement  No.  133."  The  adoption  resulted  in  the
recognition of derivative assets on the Consolidated Balance Sheet at January 1,
2001 in the amount of $13.0  million,  with a  substantially  offsetting  amount

                                       23

<PAGE>

recorded  in  Regulatory  Assets of $12.2  million.  As of January  1,  2001,  a
cumulative  effect of  accounting  change was  recognized as an expense in Other
Income (Deductions),  Net on the Consolidated  Statement of Income in the amount
of $0.1 million.

        The Company is exposed to financial risks resulting from the fluctuation
of  commodity  prices,  including  electricity  and  natural  gas. To manage the
volatility  relating  to  these  exposures,   the  Company  uses  a  variety  of
non-derivative  and  derivative  instruments,   including  options  and  futures
contracts.  These  derivatives are used  principally for hedging  purposes.  The
Company  has  a  Risk  Policy  Committee,  comprised  of  FirstEnergy  executive
officers,  which  exercises an  independent  risk  oversight  function to ensure
compliance with corporate risk  management  policies and prudent risk management
practices.

        The Company uses  derivatives  to hedge the risk of price  fluctuations.
The Company's  primary  ongoing  hedging  activity  involves cash flow hedges of
electricity  and natural gas  purchases.  The majority of the Company's  forward
commodity  contracts are considered  "normal purchases and sales," as defined by
SFAS 133, and are therefore excluded from the scope of SFAS 138. The options and
futures  contracts  determined  to be within the scope of SFAS 133 are accounted
for as cash flow  hedges and expire on various  dates  through  2003.  Gains and
losses from hedges of commodity  price risks are included in net income when the
underlying hedged  commodities are delivered.  There is currently a net deferred
loss of $67 thousand  included in  Accumulated  Other  Comprehensive  Loss as of
December  31,  2002  related  to  derivative  hedging  activity,  which  will be
reclassified  to earnings  during the next twelve months as hedged  transactions
occur.

   (J)  REGULATORY ASSETS-

        The Company recognizes,  as regulatory assets,  costs which the FERC and
PPUC have authorized for recovery from customers in future periods. Without such
authorization,  the costs  would have been  charged to income as  incurred.  All
regulatory  assets are expected to continue to be recovered from customers under
the  Company's  regulatory  plan.  The  Company  continues  to bill and  collect
cost-based rates for its transmission  and distribution  services,  which remain
regulated;  accordingly,  it is  appropriate  that  the  Company  continues  the
application of SFAS 71 to those operations.

        Net regulatory  assets on the Consolidated  Balance Sheets are comprised
of the following:


                                                           2002         2001
      -----------------------------------------------------------------------
                                                             (In millions)

      Regulatory transition charge...................   $  986.2     $1,115.9
      Customer receivables for future income taxes...      116.0        110.9
      Nuclear decommissioning costs..................       53.7         34.7
      Provider of last resort deferrals..............        --          32.7
      Employee postretirement benefit costs..........       19.5         21.4
      Loss on reacquired debt........................        4.4          4.8
      Other..........................................       (0.7)          --
      -----------------------------------------------------------------------
         Total.......................................   $1,179.1     $1,320.4
      =======================================================================

2.  MERGER:

        On November 7, 2001, the merger of FirstEnergy and GPU became effective
pursuant to the Agreement and Plan of Merger, dated August 8, 2000. As a result
of the merger, GPU's former wholly owned subsidiaries, including the Company,
became wholly owned subsidiaries of FirstEnergy.

        The merger was accounted for by the purchase  method of accounting.  The
assets acquired and  liabilities  assumed were recorded at estimated fair values
as  determined  by  FirstEnergy's  management  based  on  information  currently
available and on current  assumptions as to future  operations.  Merger purchase
accounting  adjustments recorded in the records of the Company primarily consist
of: (1)  revaluation of certain  property,  plant and  equipment;  (2) adjusting
preferred stock subject to mandatory  redemption and long-term debt to estimated
fair  value;  (3)  recognizing  additional  obligations  related  to  retirement
benefits;  and  (4)  recognizing  estimated  severance  and  other  compensation
liabilities.  Other assets and  liabilities  were not adjusted since they remain
subject  to rate  regulation  on a  historical  cost  basis.  The  excess of the
purchase  price  over the  estimated  fair  values of the  assets  acquired  and
liabilities  assumed was recognized as goodwill.

        During  2002,  certain  pre-acquisition  contingencies  and other  final
adjustments to the fair values of the assets  acquired and  liabilities  assumed
were reflected in the final allocation of the purchase price.  These adjustments
primarily  related to: (1) final actuarial  calculations  related to pension and
postretirement benefit obligations;  (2) establishment of a reserve for deferred
energy  costs  recognized  prior  to the  merger,  and  (3)  return  to  accrual
adjustments  for  income  taxes.  As a  result  of these  adjustments,  goodwill
increased by approximately  $101.4 million. As of December 31, 2002, the Company
had recorded goodwill of approximately $885.8 million related to the merger.

                                       24

<PAGE>

3.  LEASES:

        Consistent  with  regulatory  treatment,  the  rentals  for  capital and
operating  leases  are  charged  to  operating   expenses  on  the  Consolidated
Statements of Income.  Prior to the sale of its nuclear  generating  facility in
December  1999, the Company's  capital lease  obligations  related  primarily to
nuclear fuel lease agreements with  nonaffiliated fuel trusts for the plant. The
Company's most significant  operating lease relates to the sale and leaseback of
a portion of its ownership interest in the Merrill Creek Reservoir project.  The
interest  element related to this lease was $0.2 million,  $1.9 million and $1.9
million for the years 2002, 2001 and 2000.

        As of  December  31,  2002,  the future  minimum  lease  payments on the
Company's Merrill Creek operating lease, net of reimbursements  from sublessees,
are: $2.5 million, $1.2 million, $1.5 million, $1.5 million and $1.5 million for
the years 2003  through  2007,  respectively,  and $45.2  million  for the years
thereafter.  The Company's  Merrill Creek lease payments were offset against the
actual net divestiture  proceeds  received from the 1999 sales of its generating
assets.

4. CAPITALIZATION:

   (A)  RETAINED EARNINGS-

        The  merger  purchase  accounting  adjustments  included  resetting  the
retained earnings balance to zero at the November 7, 2001 merger date.

        In general,  the Company's first mortgage bond (FMB) indentures restrict
the payment of dividends or  distributions  on or with respect to the  Company's
common stock to amounts credited to earned surplus since  approximately the date
of its indenture. At such date, the Company had a balance of $3.4 million in its
earned  surplus  account,  which would not be available  for  dividends or other
distributions.  As of December  31,  2002,  the Company  had  retained  earnings
available  to pay  common  stock  dividends  of $14.5  million,  net of  amounts
restricted under the Company's FMB indentures.

   (B)  STOCK COMPENSATION PLANS-

        In 2001,  FirstEnergy  assumed  responsibility  for two new  stock-based
plans as a result of its acquisition of GPU. No further stock-based compensation
can be awarded under the GPU, Inc.  Stock Option and  Restricted  Stock Plan for
MYR Group Inc. Employees (MYR Plan) or the 1990 Stock Plan for Employees of GPU,
Inc. and  Subsidiaries  (GPU Plan).  All options and restricted stock under both
Plans have been converted into FirstEnergy options and restricted stock. Options
under the GPU Plan became fully  vested on November 7, 2001,  and will expire on
or before June 1, 2010.  Under the MYR Plan,  all options and  restricted  stock
maintained their original  vesting periods,  which range from one to four years,
and will expire on or before December 17, 2006.

        Additional  stock based plans  administered  by FirstEnergy  include the
Centerior  Equity  Plan (CE Plan) and the  FirstEnergy  Executive  and  Director
Incentive Compensation Plan (FE Plan). All options are fully vested under the CE
Plan, and no further awards are permitted. Outstanding options will expire on or
before  February 25, 2007.  Under the FE Plan,  total awards  cannot exceed 22.5
million  shares of common  stock or their  equivalent.  Only stock  options  and
restricted stock have been granted, with vesting periods ranging from six months
to seven years.

        Collectively,  the  above  plans  are  referred  to as the FE  Programs.
Restricted common stock grants under the FE Programs were as follows:

                                                 2002     2001      2000
    ---------------------------------------------------------------------

    Restricted common shares granted......      36,922  133,162   208,400
    Weighted average market price ........      $36.04   $35.68    $26.63
    Weighted average vesting period
      (years).............................         3.2      3.7       3.8
    Dividends restricted..................       Yes        *      Yes
    ---------------------------------------------------------------------

* FE Plan  dividends  are paid as  restricted  stock on 4,500  shares;  MYR Plan
  dividends are paid as unrestricted cash on 128,662 shares

                                       25

<PAGE>


        Under the Executive Deferred Compensation Plan (EDCP), covered employees
can direct a portion of their Annual Incentive Award and/or Long-Term  Incentive
Award into an unfunded  FirstEnergy Stock Account to receive vested stock units.
An  additional  20%  premium is received in the form of stock units based on the
amount  allocated to the  FirstEnergy  Stock  Account.  Dividends are calculated
quarterly  on stock  units  outstanding  and are paid in the form of  additional
stock units. Upon withdrawal,  stock units are converted to FirstEnergy  shares.
Payout  typically  occurs  three years from the date of  deferral;  however,  an
election can be made in the year prior to payout to further  defer shares into a
retirement  stock  account  that  will pay out in cash  upon  retirement.  As of
December 31, 2002, there were 296,008 stock units outstanding.

        Stock option  activities  under the FE Programs for the past three years
were as follows:

                                                Number of      Weighted Average
          Stock Option Activities                Options        Exercise Price
      -------------------------------------------------------------------------
      Balance, January 1, 2000.........         2,153,369           $25.32
      (159,755 options exercisable)....                              24.87

        Options granted................         3,011,584            23.24
        Options exercised..............            90,491            26.00
        Options forfeited..............            52,600            22.20
      Balance,  December 31, 2000......         5,021,862            24.09
      (473,314 options exercisable)....                              24.11

        Options granted................         4,240,273            28.11
        Options exercised..............           694,403            24.24
        Options forfeited..............           120,044            28.07
      Balance, December 31, 2001.......         8,447,688            26.04
      (1,828,341 options exercisable)..                              24.83

        Options granted................         3,399,579            34.48
        Options exercised..............         1,018,852            23.56
        Options forfeited..............           392,929            28.19
      Balance,  December 31, 2002......        10,435,486            28.95
      (1,400,206 options exercisable)..                              26.07

        As of December 31, 2002, the weighted average remaining contractual life
of outstanding stock options was 7.6 years.

        No material  stock-based  employee  compensation expense is reflected in
net income for stock  options  granted  under the above plans since the exercise
price was equal to the market value of the underlying  common stock on the grant
date.  The effect of  applying  fair value  accounting  to  FirstEnergy's  stock
options is summarized in Note 1E - Stock-Based Compensation.

   (C)  PREFERRED AND PREFERENCE STOCK-

        The  Company's  preferred  stock  authorization  consists  of 10 million
shares without par value. No preferred shares are currently outstanding.

   (D)  COMPANY-OBLIGATED MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES OF
        SUBSIDIARY TRUST HOLDING SOLELY PARTNERSHIP PREFERRED SECURITIES-

        The Company has formed a statutory business trust, Met-Ed Capital Trust,
which is owned through a wholly-owned limited partnership of the Company, Met-Ed
Capital II, L.P., of which a wholly-owned  subsidiary of the Company is the sole
general partner.  In this  transaction,  Met-Ed Capital Trust invested the gross
proceeds from the sale of $100.0 million of its 7.35% trust preferred securities
in the preferred  securities of Met-Ed Capital II, L.P.,  which in turn invested
those  proceeds  in  $103.1  million  of 7.35%  subordinated  debentures  of the
Company. The sole assets of Met-Ed Capital Trust are the preferred securities of
Met-Ed  Capital  II,  L.P.,  whose sole  assets are the  Company's  subordinated
debentures with the same rate and maturity date as the preferred securities. The
Company  has  effectively  provided a full and  unconditional  guarantee  of its
obligations  under  its  trust's  preferred  securities.   The  trust  preferred
securities,  which  mature in 2039 and have a  liquidation  value of $25.00  per
security,  are redeemable at the option of the Company  beginning in May 2004 at
100% of their principal amount. The interest on the subordinated debentures (and
therefore the distributions on the preferred  securities) may be deferred for up
to 60 months,  but the Company may not pay  dividends  on, or redeem or acquire,
any of its cumulative  preferred or common stock until deferred  payments on its
subordinated debentures are paid in full.

                                       26

<PAGE>

   (E)  LONG-TERM DEBT-

        The Company's  first mortgage bond  indenture,  which secures all of the
Company's FMBs,  serve as a direct first mortgage lien on  substantially  all of
the  Company's  property  and  franchises,   other  than  specifically  excepted
property.

        The Company has various debt covenants under its financing arrangements.
The most  restrictive  of these  relate to the  nonpayment  of  interest  and/or
principal on debt, which could trigger a default.  Cross-default provisions also
exist between FirstEnergy and the Company.

        Based  on the  amount  of bonds  authenticated  by the  Trustee  through
December 31, 2002 the Company's annual sinking and improvement fund requirements
for all bonds  issued  under the mortgage  amount to $5.9  million.  The Company
expects to fulfill its sinking and  improvement  fund  obligation  by  providing
refundable bonds to the Trustee.

        Sinking  fund   requirements  for  FMBs  and  maturing   long-term  debt
(excluding capital leases) for the next five years are:

                                 (In millions)
                     -------------------------
                       2003..........$ 60.5
                       2004..........  40.5
                       2005..........  50.5
                       2006.......... 150.5
                       2007..........  50.5
                     -------------------------


        The Company's  obligations to repay certain  pollution  control  revenue
bonds are secured by several series of FMBs.  Certain  pollution control revenue
bonds are  entitled to the benefit of  noncancelable  municipal  bond  insurance
policies of $42.2  million to pay  principal  of, or interest on, the  pollution
control revenue bonds.

   (F)  COMPREHENSIVE INCOME-

        Comprehensive income includes net income as reported on the Consolidated
Statements of Income and all other changes in common stockholder's equity except
those resulting from  transactions with the Company's parent. As of December 31,
2002,  accumulated other comprehensive income consisted of an unrealized loss on
derivative instruments of $39,000.

5.  SHORT-TERM BORROWINGS:

        The Company may borrow from its affiliates on a short-term basis. As of
December 31, 2002, the Company had total short-term borrowings of $88.3 million
from its affiliates with a weighted average interest rate of approximately 1.8%.

6.  COMMITMENTS, GUARANTEES AND CONTINGENCIES:

   (A)  CAPITAL EXPENDITURES-

        The Company's  current forecast  reflects  expenditures of approximately
$288 million for property  additions and improvements from 2003 through 2007, of
which approximately $53 million is applicable to 2003.

   (B)  NUCLEAR INSURANCE-

        The  Price-Anderson Act limits the public liability relative to a single
incident at a nuclear  power plant to $9.5  billion.  The amount is covered by a
combination  of private  insurance  and an industry  retrospective  rating plan.
Based on its present ownership interest in TMI-2, the Company is exempt from any
potential assessment under the industry retrospective rating plan.

        The Company is also  insured as to its  interest in TMI-2 under a policy
issued to the operating company for the plant.  Under this policy,  $150 million
is provided for property damage and decontamination  and decommissioning  costs.
Under this policy,  the Company can be assessed a maximum of approximately  $0.4
million for incidents at any covered nuclear facility  occurring during a policy
year which are in excess of  accumulated  funds  available  to the  insurer  for
paying losses.

        The  Company  intends to maintain  insurance  against  nuclear  risks as
described above as long as it is available.  To the extent that property damage,
decontamination,  decommissioning,  repair and replacement  costs and other such
costs  arising from a nuclear  incident at TMI-2 exceed the policy limits of the
insurance in effect with respect to

                                       27

<PAGE>


that plant, to the extent a nuclear  incident is determined not to be covered by
the  Company's  insurance  policies,  or to the extent  such  insurance  becomes
unavailable in the future, the Company would remain at risk for such costs.

   (C ) ENVIRONMENTAL MATTERS-

        The Company has been named as a "potentially responsible party" (PRP) at
waste  disposal  sites  which  may  require  cleanup  under  the   Comprehensive
Environmental  Response,  Compensation and Liability Act of 1980. Allegations of
disposal of hazardous  substances at historical sites and the liability involved
are often unsubstantiated and subject to dispute;  however, federal law provides
that all PRPs for a particular site be held liable on a joint and several basis.
Therefore,  potential  environmental  liabilities  have been  recognized  on the
Consolidated  Balance  Sheet as of December 31, 2002,  based on estimates of the
total costs of cleanup,  the  Company's  proportionate  responsibility  for such
costs and the  financial  ability of other  nonaffiliated  entities to pay.  The
Company has accrued  liabilities  aggregating  approximately  $0.2 million as of
December 31, 2002. The Company does not believe environmental  remediation costs
will have a material  adverse effect on its financial  condition,  cash flows or
results of operations.

   (D)  OTHER LEGAL PROCEEDINGS-

        Various lawsuits, claims and proceedings related to the Company's normal
business operations are pending against the Company, the most significant of
which is described below.

        The Company  has a 50%  ownership  interest in TMI-2,  which was damaged
during a 1979 accident. As a result of the accident, claims for alleged personal
injury were filed against the Company,  JCP&L,  Penelec and GPU (the defendants)
in the U.S. District Court for the Middle District of Pennsylvania. In 1996, the
District Court granted a motion for summary judgment filed by the defendants and
dismissed  the ten initial  "test cases" which had been selected for a test case
trial.  In January 2002,  the District Court granted the  defendants'  July 2001
motion for summary  judgment on the remaining 2,100 pending claims.  In February
2002,  the  plaintiffs  filed a notice of appeal to the United  States  Court of
Appeals for the Third Circuit. In December 2002, the Court of Appeals refused to
hear the appeal, which effectively ended further legal action for those claims.

7.  OTHER INFORMATION:

          The following represents the financial data which includes
supplemental unaudited prior years' information as compared to consolidated
financial statements and notes previously reported in 2001 and 2000.


   (A)      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                      Nov. 7-      Jan. 1-
                                                                      Dec. 31,     Nov. 6,
                                                          2002         2001         2001         2000
                                                          ----         ----         ----         ----
                                                                         (In thousands)
         Other cash flows from operating activities:
<S>                                                    <C>            <C>        <C>           <C>
         Accrued taxes...............................  $  9,059       $5,229  |  $(18,960)     $(15,207)
         All other...................................    (9,597)       3,057  |   (40,353)      (10,689)
                                                       --------      -------  |  --------      --------
           Other cash provided from (used for)
             operating activities....................  $   (538)      $8,286  |  $(59,313)     $(25,896)
                                                       =========      ======  |  ========      =======
</TABLE>

   (B)  REVENUES - INDEPENDENT SYSTEM OPERATOR (ISO) TRANSACTIONS-

        The  Company   records   purchase  and  sales   transactions   with  PJM
Interconnection  ISO,  an  independent  system  operator,  on a gross  basis  in
accordance  with EITF Issue No. 99-19,  "Reporting  Revenue Gross as a Principal
versus Net as an Agent." The aggregate  purchase and sales  transactions for the
three years ended December 31, 2002, are summarized as follows:

                                       28

<PAGE>
                                   Nov. 7-Dec. 31,   Jan. 1-Nov. 6,
                          2002          2001               2001         2000
      ------------------------------------------------------------------------
                                             (In millions)

      Sales............. $  9          $  1       |        $11          $49
      Purchases.........   67            13       |         81           18
      --------------------------------------------|---------------------------

        The Company's revenues on the Consolidated  Statements of Income include
wholesale  electricity  sales  revenues  from the PJM ISO from  power  sales (as
reflected in the table  above)  during  periods when the Company had  additional
available  power  capacity.  Revenues also include sales by the Company of power
sourced from the PJM ISO  (reflected  as  purchases  in the table above)  during
periods  when the  Company  required  additional  power to meet its retail  load
requirements.

   (C)  TRANSACTIONS WITH AFFILIATED COMPANIES-

        The primary affiliated companies transactions are as follows:

                                                 Nov. 7-     Jan. 1-
                                                 Dec. 31,     Nov. 6,
                                         2002      2001        2001      2000
------------------------------------------------------------------------------
                                                    (In millions)
Operating Revenues:
Wholesale sales-affiliated companies... $ 18.6    $ 3.2   |   $ 8.4     $20.0
                                                          |
Operating Expenses:                                       |
Power purchased from FES...............  171.9     10.6   |      --        --
GPU Service, Inc. support services.....   68.1     14.0   |    81.0      77.0
Power purchased from other affiliates..    9.5      1.9   |     9.2       2.3
----------------------------------------------------------|-------------------


   (D)  RETIREMENTS BENEFITS (1)

        Net pension and other postretirement benefit costs (income) for the
three years ended December 31, 2002 are approximately as follows:

                                                 Nov. 7-     Jan. 1-
                                                 Dec. 31,     Nov. 6,
                                         2002      2001        2001      2000
------------------------------------------------------------------------------
                                                    (In millions)

Pension Benefits....................   $(10.7)     $(3.2)  |  $(8.3)    $(5.9)
Other Postretirement Benefits.......      2.7        1.4   |    8.0      10.4
-----------------------------------------------------------|------------------

(1) Includes estimated portion of benefit costs included in billings from GPUS.

8.  RECENTLY ISSUED ACCOUNTING STANDARDS:

        FASB Interpretation (FIN) No. 45, "Guarantor's Accounting and Disclosure
        Requirements   for   Guarantees,   Including   Indirect   Guarantees  of
        Indebtedness of Others - an interpretation of FASB Statements No. 5, 57,
        and 107 and rescission of FASB Interpretation No. 34"

        The FASB issued FIN 45 in January 2003. This  interpretation  identifies
minimum guarantee  disclosures required for annual periods ending after December
15, 2002. It also clarifies  that  providers of guarantees  must record the fair
value of those  guarantees  at their  inception.  This  accounting  guidance  is
applicable  on a  prospective  basis to  guarantees  issued  or  modified  after
December 31, 2002.  The Company does not believe that  implementation  of FIN 45
will be material but it will continue to evaluate anticipated guarantees.

        FIN 46, "Consolidation of Variable Interest Entities - an interpretation
        of ARB 51"

        In January  2003,  the FASB  issued this  interpretation  of ARB No. 51,
"Consolidated Financial Statements". The new interpretation provides guidance on
consolidation of variable interest entities (VIEs), generally defined as certain
entities  in  which  equity  investors  do not  have  the  characteristics  of a
controlling  financial interest or do not have sufficient equity at risk for the
entity to finance  its  activities  without  additional  subordinated  financial
support  from other  parties.  This  Interpretation  requires an  enterprise  to
disclose  the  nature  of its  involvement  with a VIE if the  enterprise  has a
significant  variable  interest  in  the  VIE  and to  consolidate  a VIE if the
enterprise is the primary  beneficiary.  VIEs created after January 31, 2003 are
immediately subject to the provisions of FIN 46. VIEs created before February 1,
2003 are subject to this  interpretation's  provisions  in the first  interim or
annual  reporting  period  beginning  after June 15, 2003 (our third  quarter of
2003).  The FASB also  identified  transitional  disclosure  provisions  for all
financial statements issued after January 31, 2003.

                                       29

<PAGE>

        The Company  currently has transactions with entities in connection with
the sale of  preferred  securities,  which  may fall  within  the  scope of this
interpretation, and which are reasonably possible of meeting the definition of a
VIE in accordance with FIN 46. The Company currently consolidates these entities
and believes it will continue to consolidate following the adoption of FIN 46.

9.  SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED):

        The  following  summarizes  certain  consolidated  operating  results by
quarter for 2002 and 2001.


                                                  Three Months Ended
                                      -----------------------------------------
                                      March 31,  June 30,   Sept. 30,  Dec. 31,
                                        2002       2002       2002       2002
-------------------------------------------------------------------------------
                                                    (In millions)

Operating Revenues..................   $245.8     $240.0    $281.5     $219.3
Operating Expenses and Taxes........    212.3      216.8     267.9      198.3
-------------------------------------------------------------------------------
Operating Income....................     33.5       23.2      13.6       21.0
Other Income........................      5.2        5.5       5.9        5.1
Net Interest Charges................     12.1       12.7      12.4       12.6
-------------------------------------------------------------------------------
Net Income..........................   $ 26.6     $ 16.0    $  7.1    $  13.5
===============================================================================


<TABLE>
<CAPTION>

                                                           Three Months Ended
                                                 --------------------------------------
                                                 March 31,      June 30,      Sept. 30,   Oct. 1-Nov. 6   Nov. 7-Dec. 31,
                                                   2001          2001            2001          2001          2001
------------------------------------------------------------------------------------------------------------------------
                                                                            (In millions)
<S>                                               <C>            <C>            <C>            <C>         <C>
Operating Revenues..........................      $221.0         $222.6         $283.5         $97.5   |   $143.7
Operating Expenses and Taxes................       196.6          197.9          248.3          79.5   |    126.4
-------------------------------------------------------------------------------------------------------|----------------
Operating Income............................        24.4           24.7           35.2          18.0   |     17.3
Other Income (Expense)......................         4.7            5.3            2.6          (4.8)  |      5.5
Net Interest Charges........................        13.1           14.1           13.3           7.2   |      8.2
-------------------------------------------------------------------------------------------------------|----------------
Net Income..................................     $  16.0        $  15.9        $  24.5        $  6.0   |  $  14.6
========================================================================================================================

</TABLE>

                                       30

<PAGE>


Report of Independent Accountants


To the Stockholders and Board of Directors of
Metropolitan Edison Company:

In our opinion,  the  accompanying  consolidated  balance sheet and consolidated
statement of capitalization and the related  consolidated  statements of income,
common  stockholder's  equity,  preferred  stock,  cash flows and taxes  present
fairly, in all material respects,  the financial position of Metropolitan Edison
Company (a wholly owned subsidiary of FirstEnergy  Corp.) and subsidiaries as of
December 31, 2002, and the results of their  operations and their cash flows for
the year  then  ended and the year  ended  December  31,  2000  (pre-merger)  in
conformity with accounting principles generally accepted in the United States of
America.  These  financial  statements are the  responsibility  of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audit.  We conducted our audits of these  statements in
accordance with auditing  standards  generally  accepted in the United States of
America,  which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.  The  consolidated  financial
statements of  Metropolitan  Edison Company and  subsidiaries as of December 31,
2001 and for the period from  January 1, 2001 to  November 6, 2001  (pre-merger)
and the period from  November 7, 2001 to December  31, 2001  (post-merger)  were
audited by other  independent  accountants  who have  ceased  operations.  Those
independent  accountants  expressed an unqualified  opinion on those  financials
statements in their report dated March 18, 2002.


PricewaterhouseCoopers LLP

Cleveland, Ohio
February 28, 2003

                                       31

<PAGE>


The following report is a copy of a report  previously issued by Arthur Andersen
LLP and has not been reissued by Arthur Andersen LLP.


Report of Previous Independent Public Accountants


To the Stockholders and Board of Directors of
Metropolitan Edison Company:

We have audited the  accompanying  consolidated  balance sheet and  consolidated
statement of  capitalization  of  Metropolitan  Edison  Company (a  Pennsylvania
corporation and wholly owned  subsidiary of FirstEnergy  Corp.) and subsidiaries
as of December 31, 2001 (post-merger),  and the related consolidated  statements
of income,  common stockholder's  equity,  preferred stock, cash flows and taxes
for the period from  January 1, 2001 to November  6, 2001  (pre-merger)  and the
period from November 7, 2001 to December 31, 2001 (post-merger). These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our  audit.  The  financial   statements  of  Metropolitan  Edison  Company  and
subsidiaries as of December 31, 2000 and for each of the two years in the period
ended  December  31, 2000  (pre-merger),  were audited by other  auditors  whose
report  dated  January  31,  2001,  expressed  an  unqualified  opinion on those
statements.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the 2001 financial statements referred to above present fairly,
in all material respects,  the financial position of Metropolitan Edison Company
and subsidiaries as of December 31, 2001 (post-merger), and the results of their
operations  and their cash flows for the period from January 1, 2001 to November
6, 2001  (pre-merger)  and the period from November 7, 2001 to December 31, 2001
(post-merger),  in conformity with accounting  principles  generally accepted in
the United States.



ARTHUR ANDERSEN LLP

Cleveland, Ohio,
   March 18, 2002.


                                       32